Income tax declaration is an important obligation of every individual earner. In China, the individual income derived from China and overseas are taxable under the country’s tax policy. Hence, taxpayers are required to conduct self-declaration or self-reporting of their comprehensive income according to China’s IIT law.
Read our previous article on China’s IIT Law Withholding Measures for 2019 Released
The rules in China regarding tax declaration depends on different cases. Especially, the taxpayers are categorized based on their tax residency status – whether resident or non-resident. This article will guide you through the specific rules on declaring your taxable income.
Who may be required to declare individual income tax?
1. Taxpayers with an annual income of RMB 120,000 need to declare within 3 months after the end of the tax year. These include:
- Individuals having no domicile in China;
- Individuals who have resided in China for 183 days or less.
2. Taxpayers with a foreign income need to declare within 30 days after the tax year ends. These include:
- Individuals with either domicile or non-domicile status but have a residence in China for 183 days or less (or one tax year).
3. Taxpayers with two or more sources of income (wages and salaries) in China need to declare within 15 days of the next month. These include:
- Individuals who obtain taxable income;
- With no withholding agent;
- Any other circumstances required by the State Council.
4. Taxpayers with equities transferred to any other individual or entity need to declare within 15 days of the following month.
5. Taxpayers with income from the transfer of restricted stock must also declare.
6. Taxpayers with investments on personal non-monetary assets should conduct annual filing and payment of IIT within the deadline or tax payment limits agreed upon.
On the individual income tax from restricted stock transfer
The tax settlement for restricted stock transfer is pre-withheld and prepared by securities institutions. It should be handled within 3 months as of the first day of the following month. On the other hand, taxpayers who adopt self-declaration will have to report their IIT income on the transfer within the first 15 days of the next month.
Required materials for self-declaration
Equity transfer to another entity
- 2 copies of the Self-Declaration Form of Individual Income Tax (Table 4)
- A copy of the equity transfer contract
Conditional requirement:
- If asset evaluation is required, submit an asset value assessment report on net assets or land and real estate issued by a qualified intermediary.
- If the tax base is low, proof of corresponding materials is needed.
- If benefited from deferred tax payment policies for equity incentives and technology investments, submit proof of transfer price and the original value of the stock for deferred tax payment.
Transfer of restricted stock
Case 1: Taxpayers whose IIT are levied through pre-withholding and prepayment by securities institutions
- 2 copies of the Form for Filing Settlement of Individual Income Tax on the Income from the Transfer of Restricted Stocks
- A copy of records of restricted stock transactions bearing the seal of the securities institution
- A copy of tax payment voucher (exclusively used for the Tax Authority Custodian Fund or the Transfer of Tax payment
- A copy of relevant vouchers for the original value of the property
Conditional requirement:
If the taxpayer authorizes a representative to do the tax declaration, the following documents are needed:
- The original ID of the representative;
- Power of attorney with the authorization statement.
Case 2: Taxpayers who opted to self-declare
- 2 copies of the Form for Filing Settlement of Individual Income Tax on the Income from the Transfer of Restricted Stocks
Investments with personal non-monetary assets
- A copy of the Form of Individual Income Tax by installments on investments with personal non-monetary assets
- A copy of IIT payment certificate of the said installments
- 2 copies of the Self-declaration of Individual Income Tax
Taxpayers under other circumstances or required by the tax authorities
Taxpayers who have taken advantage of the IIT pilot program and deferred payment of taxes for commercial health insurance need to submit the following:
- A copy of the detailed statement on the pre-tax deductions of commercial health insurance and tax-deferred
Taxpayers who are entitled to tax reduction and exemption need to present the following:
- A copy of the Report Form for matters regarding tax reduction and the exemption
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