The final settlements and payments of IIT for the year 2020 will be concluded soon. This year, the whole process has been further simplified. If you are still not clear about the IIT settlement, check our article to know more!
On Feb 8, 2020, China’s State Taxation Administration (STA) released the Announcement of the Final Settlements and Payments of Individual Income Tax on the Annual Comprehensive Income in 2020.
Taxpayers need to calculate their annual IIT payable, then deduct their prepayment to get the annual amount of the tax refund or payment and make a declaration to the authorities.
To know more about the individual income tax, please check our previous articles
According to the announcement, taxpayers are required to make a settlement during the period between March 1 and June 30.
They need to calculate their annual IIT payable, then deduct their prepayment to get the annual amount of the tax refund or payment and make a declaration to the authorities.
In other words, if your IIT prepayment exceeds your actual IIT payable for the whole year, you can get a refund; otherwise, you need to pay the unpaid tax to settle.
Generally, all taxpayers are required to make the settlement as long as their prepayment is not equal to their tax payable.
However, the government has issued a list of exemptions. Those who meet any of the following conditions don’t need to settle to lower the tax burden:
Well first, you need to get clear your annual comprehensive income, including:
- Need to pay the tax but the annual comprehensive income is less than 120,000 yuan;
- Need to pay the tax but the tax payable is less than 400 yuan;
- The prepayment is equal to the annual tax payable, or you don’t apply for the refund.
Then deduct the standard basic deduction (60,000 yuan), specific deductions, additional deductions, and charitable contributions to get the taxable income.
After the multiplication by an applicable tax rate and deduction of the quick deduction, you’ll get the annual IIT payable.
- Employment income
- Remuneration for personal services
- Author’s remuneration
© Image | china-briefing
The tax refund or the tax payment is the difference between your annual tax payable and the tax prepayment.
Taxpayers need to make the annual settlement for 2020 during the period between March 1 and June 30, 2021.
For those who have no domicile in China and will leave the country before March 1, 2021, they can settle the tax before departure.
As we said above, the settlement makes you pay the individual income tax your actually need to pay.
If you fail to make a tax settlement while you’re required, apparently, that’s tax evasion. And your tax credit will be affected.
In serious cases, violators are not allowed to leave China, and get fined even go to jail.
If you have any questions about doing business or tax payments in China, please feel free to contact HACOS!
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SOURCE | Shanghai Administration of Foreign Experts Affairs