The individual income tax (IIT) return is a major concern for every taxpayer in China. According to the latest announcement on handling IIT return (Announcement No. 2), every taxpayer should handle their annual accounts including tax payments and refunds. The tax bureau has emphasized the use of optimized methods in processing taxes including the new personal income tax app that was launched at the end of 2018. This app simplifies the annual closing procedures for taxpayers and facilitates tax refunds for individual foreign workers.
Read our previous post about 2020 Annual Closing Reminders for Businesses in China
The online tax app enables taxpayers to receive their additional tax deductions after completing the application process. Furthermore, foreigners can take advantage of its features including tax payment and tax deduction queries. Find out the step-by-step process on how to use the personal income tax app.
IIT reforms 2018-2019
On August 31, 2018, the Chinese government passed the new reforms on IIT Law which categorized residents and non-resident individuals for tax purposes. According to the new IIT law, a foreigner becomes a tax resident if he or she resides in China for 183 days or more per tax year (January 1 – December 31). On the other hand, he or she is otherwise treated as a non-resident for staying in China for less than 183 days.
If a foreign individual is considered a resident taxpayer, both China-sourced and non-China sourced income will be subjected to China’s Individual Income Tax. Otherwise, if he or she is a non-resident taxpayer, then his or her China-sourced income will only be subjected to IIT.
Have you read? International Executives Income Taxation in China
The IIT reform also includes the amendment from the five-year rule to the six-year rule for tax residents. The new regulation extends the five-year tax exemption on foreign income to six consecutive years. This means that an individual is exempt from paying non-China source income tax if he or she has been in China for six years. It should be noted, however, that the individual should be outside China for more than 30 days in a single trip during the six-year period.
Furthermore, the new IIT system that took effect on January 1, 2019, allowed taxpayers to receive additional tax deductions in the form of the Special Itemized Deductions. The introduction of these additional deductions creates a more standardized Chinese IIT system that aligns with international practices.
Download our comprehensive report on the new IIT Reform Law here.
How to use the online tax app for IIT return
Through the online personal income tax app of China’s State Taxation Administration, individual taxpayers in China can claim their additional tax deductions and apply for tax refunds. Taxpayers can also take advantage of the service when making tax inquiries or other related tax payments. Below are the steps on registering for the app and checking payments.
1. Download the online tax app by scanning the QR code below (for Android users).
Or, you can search 个人所得税 on the Apple Store.
2. Select the city or region where you registered your residence.
3. You have the option to choose which way you want to register. Choose the second option which is face recognition registration.
4. Complete your identity information including certificate type, ID number/passport number, name, nationality, and enter the verification code.
5. Enter relevant details such as username, password, phone number, verification code, and household registration region.
6. Choose the third option service for your income tax details inquiry under the common business section.
7. Select the tax year and type of personal income.
Key takeaways
The new personal income tax app also provides a tax deduction declaration platform for special additional deductions such as children’s education, continuing education, treatment for serious diseases, mortgage interest, rent, and eldercare. Thus, taxpayers will get an instant overview of all tax deductions available to them.
On the other hand, there is no English version of the online app. Therefore, foreigners with limited Chinese language proficiency may still find it difficult to use. Specifically, they may not be able to apply for the annual IIT return smoothly. Hence, it is advisable to authorize a withholding agent such as an accounting firm to do the filing process.
Contact us
S.J. Grand’s tax and accountancy services provide advisory on China’s tax and business regulatory environment as well as assist in annual closing and tax refunds for foreign individual workers and enterprises in China. Contact us to get you started.
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