China Taxation Guidance on Annual Individual Income Tax Declaration for Fiscal Year of 2019 in China
December 2019
China Taxation
Guidance on Annual Individual Income Tax Declaration for Fiscal Year of 2019 in China
On December 31, 2019 China’s State Administration of Taxation issued the “Announcement of Annual Individual Income Tax Declaration for Comprehensive Individual Income for fiscal year of 2019”, which provides detailed guidance for handling the annual individual income tax declaration for fiscal year of 2019. We have sorted out the main content of this announcement as following for your reference.
In accordance with the provisions of the Individual Income Tax Law, by the end of fiscal year of 2019, individual residents need to aggregate four types of income, including “Wages and Salaries”, “Labor Remuneration”, “Author’s Remuneration”, and “Royalties” (hereinafter refer to as “Comprehensive Income”), and deduct RMB60,000 expense, special deductions, special additional deductions and other deductions determined by the laws for the period of 01.01.2019 – 31.12.2019; then multiply with the applicable tax rate for comprehensive income and deduct the quick deduction (please refer to Annex 1: The Rate Schedule) to calculate the amount of annual tax payable; then deduct the annual tax prepaid for fiscal year of 2019, recognize the tax amount to be refunded or repaid and apply with the tax authorities for tax refund or repayment. The computation formula is as follows:
The calculation method of the tax amount to be refunded or repaid for fiscal year of 2019
= [(Comprehensive income – RMB60,000 – Special deductions of social insurance and housing provident fund contributions – Children’s education deduction and other special additional deductions – Other deductions determined by the laws) × Applicable tax rate – Quick deduction] – the annual tax prepaid for fiscal year of 2019
1. The annual tax declaration is not required if:
(1) The taxpayer should repay the tax, but the annual comprehensive income does not exceed RMB120,000;
(2) The taxpayer should repay the tax, but the amount of the repayment does not exceed RMB400;
(3) There is no any discrepancy between the annual tax prepaid with the annual tax payable, or taxpayer does not apply for annual tax declaration for tax refund.
[Recommendation of Kaizen]
If the taxpayer derives wages and salaries from the one place during fiscal year of 2019, and all information related to the pre – tax deduction available to the taxpayer (please refer to point 5 below) has been duly uploaded to the IIT system by the taxpayer before December 31, 2019, or the taxpayer has already informed the withholding agent. So, there is no any discrepancy between the 2019 annual tax prepaid with the actual annual tax payable, and the annual tax declaration is not required.
2. The annual tax declaration is required if:
(1) The annual tax amount prepaid by the taxpayer more than the amount of annual tax payable, and taxpayer needs to apply for tax refund, the details are as follows:
(a) The annual comprehensive income in year 2019 of the taxpayer is less than RMB60,000, but the individual income tax has been already prepaid by the taxpayer;
(b) The prepaid rate of labor remuneration, author’s remuneration and loyalties higher than the applicable tax rate of the comprehensive income;
(c) When the taxpayer prepays the tax, fails to deduct or fully deduct the deduction expenses, special deductions, special additional deductions and other deductions determined by the laws, and fails to enjoy or fully enjoy the comprehensive income tax benefits, etc.
(2) The annual comprehensive income in year 2019 of the taxpayer exceeds RMB120,000, the annual tax amount prepaid by the taxpayer less than the annual tax payable, and the tax amount required to be repaid exceeds RMB400, the details are as follows:
(a) The taxpayer derives the comprehensive income from two places or more, and the applicable tax rate is increased upon consolidated calculation;
(b) Due to an error in calculation or any other reasons, the tax amount withheld and prepaid by the taxpayer in year 2019 is lower than the amount of actual tax payable.
[Recommendation of Kaizen]
Where the taxpayer meets the above conditions for handling the tax refund or repayment, Kaizen kindly advises the taxpayer to handle the tax declaration within the prescribed time limit, otherwise there could be any loss or risk of tax supervision and punishment.
3. Time frame for handling
(1) The taxpayer should complete the tax declaration for fiscal year of 2019 within the period from 1 March 2020 to 30 June 2020;
(2) The taxpayer who does not have a domicile within the territory of China, and be out of country during the period from 1 March 2020 to 30 June 2020 may handle annual declaration before leaving the country.
4. Application for annual tax declaration for tax refund/ repayment
(1) The taxpayer shall provide the information of the bank account opened within the territory of China when applies for annual tax declaration. Once the verification process completed by the tax authorities in accordance with the provisions, the tax authorities accepting the tax declaration will arrange the tax refund;
(2) State taxation administration website (including IIT mobile app) provide a handy and quick way to apply for tax refund for the taxpayers whose comprehensive income in year 2019 does not exceed RMB60,000, and for those who have already prepaid the individual income tax. The taxpayer may apply for annual tax declaration for tax refund by filling in the simple declaration form therein during the period from 1 March 2020 to 31 May 2020;
(3) When submit the application for annual tax declaration for tax repayment, the taxpayer shall arrange the relevant payment through online banking, POS machine credit card, bank counter, non-bank payment institutions or by other payment methods.
5. Pre-tax deductions that the taxpayer can continue to enjoy
For the following pre-tax deductions items that the taxpayer is not deducted or not fully deducted, may apply for deductions or supplementary deductions during the annual individual income tax declaration period:
(1) Critical illness medical expenses incurred by the taxpayer, his / her spouse and minor children in year 2019;
(2) The taxpayer has not applied for or fully enjoyed in 2019 for special additional deductions including children’s education, continuing education, housing mortgage interest or housing rent, elderly care as well as other special deductions and other deductions determined by laws;
(3) Public welfare donation expenses incurred by the taxpayer in year 2019.
[Recommendation of Kaizen]
1. To those taxpayers who have any deduction items that meet the above conditions, but have not apply for the deduction yet, Kaizen kindly reminds to upload the relevant information in time when handling the annual individual income tax declaration, or provide the detailed information to Kaizen ( in case that the taxpayer authorizes Kaizen to handle the annual individual income tax declaration).
2. The regulations on public welfare donation expenses, as follows:
(1) In accordance with the Article 6 of the Individual Income Tax Law of the People’s Republic of China:
Where an individual donates his/her income to public welfare and charitable causes such as education, poverty alleviation and relief, the donated amount can be deducted from his/her taxable income in case the donated amount does not exceed 30% of taxable income as declared by the taxpayer;
(2) In accordance with the Article 19 of the Regulations for the Implementation of the Individual IIT Law of the People’s Republic of China:
The term donation to education, poverty relief and other public welfare charities means the donation made by individuals to education, poverty relief and other public welfare charities, through social organizations or government agencies in the PRC.
6. Methods of handling
The taxpayer may choose the following methods of handling:
(1) The taxpayer can handle the annual tax declaration by himself;
(2) The withholding agent who obtains wages and salaries or continuously obtains the income from labor remuneration applies for handling on behalf of the taxpayer;
*Where the taxpayer requests the withholding agent to act on behalf of him, the withholding agent shall do so or shall train and assist the taxpayer to apply through state taxation administration website (including IIT mobile app). Where the withholding agent files the annual tax declaration for fiscal year of 2019 on behalf of the taxpayer, the taxpayer shall make the written confirmation with the withholding agent before 30 April 2020, and provide such additional information as taxpayer’s comprehensive income, relevant deductions, tax preferences etc., other than the own unit, for the fiscal year of 2019 with all of the due diligence;
(3) Where the taxpayer authorizes any professional tax services or other units or individuals (hereinafter referred to as “Authorized person”) to handle on behalf of the taxpayer, the authorized person shall sign the Letter of Authorization with the taxpayer and keep it properly once signed;
(4) The withholding agent or the authorized person shall, in a timely manner, inform the taxpayer once the annual tax declaration is completed. When the taxpayer finds out the information declared is incorrect, the taxpayer may request the withholding agent or the authorized person to amend or do so by himself.
7. Ways of application
(1) The taxpayer may apply for annual tax declaration through state taxation administration website (including IIT mobile app), and the tax authority will provide the pre – filling service of declaration form for the taxpayer;
(2) The taxpayer may mail the declaration form to the tax authority in the locality where the employment unit of the taxpayer is located ( if the taxpayer does not have an employment unit, it should be the tax authority in the locality where the household registration or habitual residence is located) or go to the tax service office for handling.
8. Information Declaration and Data Keeping
In addition to the declaration form, if there is any modification of basic information or any new deductions or tax preferences the taxpayer to be enjoyed, the taxpayer shall also fill in the relevant information with all of the due diligence while handling the annual declaration.
The taxpayer and the withholding agent filing the annual tax declaration on behalf of the taxpayer, should keep the annual declaration form as well as such information as taxpayer’s comprehensive income, relevant deductions, tax paid or tax preferences etc. within 5 years after the annual declaration period is completed.
9. Tax authorities accepting annual tax declaration
(1) Where the taxpayer handles the annual tax declaration by himself or the authorized person acts on his behalf, the declaration shall be filled with the competent tax authority in the locality where the employment unit of the taxpayer is located;
(2) Where the withholding agent handles the annual tax declaration on behalf of the taxpayer, the declaration shall be filled with the competent tax authority for withholding agent;
(3) The taxpayer who has two or more employment units shall choose and file the tax declaration with the competent tax authority in the locality where one of the units is located; The taxpayer who does not have an employment unit shall file the tax declaration with the competent tax authority in the locality where the taxpayer’s household registration or habitual residence is located.
In accordance with the Regulations for the Implementation of the Individual IIT Law of the People’s Republic of China, the taxpayer can authorize the withholding agent or other units or individuals to handle the tax declaration. Kaizen is committed to providing professional accounting and taxation services and can assist the taxpayer with handling the annual individual income tax declaration. Please feel free to contact us in case you need any of our assistance.
Annex 1: Comprehensive Individual Income Tax Withholding Rate Schedule
|
Grade |
Cumulative Taxable Income (RMB) |
Tax Rate % |
Quick Deduction |
| 1 | Less than 36,000 | 3% | – |
| 2 | More than 36,000 and less than 144,000 | 10% | 2,520 |
| 3 | More than 144,000 and less than 300,000 | 20% | 16,920 |
| 4 | More than 300,000 and less than 420,000 | 25% | 31,920 |
| 5 | More than 420,000 and less than 660,000 | 30% | 52,920 |
| 6 | More than 660,000 less than 960,000 | 35% | 85,920 |
| 7 | Over 960,000 | 45% | 181,920 |
Reference Materials:
https://www.kaizencpa.com/Services/info/id/49.html
https://www.kaizencpa.com/Services/info/id/51.html