Individual Income Tax Annual Filling | “Refund” or “Compensate”?
According to the announcement of the State Administration of Taxation, “Comprehensive Individual Income Tax Annual Filling for YR2021” begins on March 1, 2022.
A- Brief Review: What is Annual Filling
In short, the purpose of Annual Filling is to “check the remaining gaps, aggregate income and expenditure, calculate in years, and refund and compensate”, which is based on the requirement for the establishment of a comprehensive and classified individual income tax system in China since 2019, as well as an internationally accepted practice. Article 1 of the Announcement[i] stipulates the concept and content of the annual remittance.
It should be noted that the scope of the annual filling refers only to the Comprehensive Income. The classified incomes such as interest, dividend, and property lease income are not included in the annual filling.
B- Who needs to do it
Prerequisite: Only resident taxpayers under the Individual Income Tax Law are required to do the annual filling. For non-resident taxpayers, no annual filling is required. But on another hand, a non-residential taxpayer in China who tends to leave the country can do this annual filling before his leaving.
C- Who does not need to do it
Taxpayers who obtained comprehensive income from January 1, 2021 to December 31, 2021 and should have been subject to annual filling but are exempted from the annual filling, if they meet one of the below listed criteria: –
- whose comprehensive income does not exceed RMB 120,000 for the year.
- whose annual filling is required to pay tax not exceeding RMB 400.
However, taxpayers who have not withheld and prepaid taxes in accordance with the IIT Law when they obtained comprehensive income are not included in the exemption from the annual filling.
Taxpayers whose prepaid tax amount is consistent with the annual taxable amount or meet the conditions for annual remittance refund but do not apply for a refund.
- whose prepaid tax amount is consistent with the tax payable in the annual filling.
- who meet the conditions of tax refund but do not apply for a tax refund.
In both cases, the taxpayer does not need to refund or compensate or voluntarily give up the tax refund, and there is no need to do the annual filling.
D- When to do it: Two-stage processing
- First-Stage — From March 1 to March 15, 2022
For the specific taxpayers who urgently need priority processing (those who are in between generation, or those who have a heavy burden of medical care), a reservation channel for the mobile IIT APP is launched, and after making the reservation, they can submit this filling on any day in the above period.
- Second-Stage — From March 16 to June 30, 2022
Other taxpayers do not need to make a reservation and can apply for this filling at any time during the above period. Taxpayers without special urges are advised to avoid the peak of annual filling at the early stage above mentioned.
E- How to do it
Through the “Individual Income Tax” mobile APP.
For foreign taxpayers, you will need to get an access code for your first log-in to the mobile platform. The request will be as simple as to visit the tax bureau at your convenience along with your passport and get the code. Remember to modify the password within 7 days in case the access code gets expired.
F- Tips about “Annual Bonus” filling method
If you have obtained annual bonuses during the year of 2021, when doing the annual filing, after clicking “Bonus exists, please confirm in the details”, you could compare the tax results of different taxation methods of “all included in the comprehensive income taxation” or “separate taxation (bonus taxation)”, and choose the appropriate taxation method.
Meanwhile, according to the Announcement on the extension of the Implementation of the Preferential Individual Income Tax Policy for Annual Bonuses, the extension of the “bonus taxation” is till Dec 31, 2023. As well as the implementation of the allowances for foreigners.
References:
[i] <Announcement of the State Administration of Taxation on Matters Concerning the Settlement of Comprehensive Individual Income Tax for the Year 2021>
State Administration of Taxation Announcement No. 1 of 2022
http://www.chinatax.gov.cn/chinatax/n363/c5172700/content.html
If you have any further questions, please feel free to contact us.
