Dear Members and Friends,
The China-Italy Chamber of Commerce is glad to share an article that its Member GWA has published on "Annual Individual Income Tax (IIT) Reconciliation".
Annual Individual Income Tax (IIT) Reconciliation
What is it?
According to the Individual Income Tax Law, domicile residents (hereinafter referred to as "taxpayers") need to handle the individual Annual Individual Income Tax (IIT) Reconciliation of 2019 by calculating the tax payable of the current fiscal year.
How to calculate?
The final tax payable of 2019 is calculated by reducing the tax prepaid in 2019, the tax refundable (if available), and then the amount needs to be declared to the tax authorities and the tax refund or complementation shall be settled.
Tax refundable or supplemented in 2019 = [(comprehensive income (i) – RMB 60,000 (ii) – “three insurances and one fund” (iii) as special deduction - special additional deduction (iv) - other deductions determined by law - donation) × applicable tax rate - quick calculation deduction amount] - tax prepaid in 2019.
According to the Individual Income Tax Law, the IIT annual reconciliation of 2019 only calculates and settles the refundable or supplementary taxes of the comprehensive income of the current year, which does not involve the previous or future.
Who should do it?
Taxpayers are required to do annual settlement if any of the following condition is satisfied:
If taxpayers have paid IIT in advance according to law in 2019 and meet one of the following conditions do not need to do the annual settlement:
When taxpayer should do the declaration?
Taxpayers need to handle the individual annual tax settlement of 2019 from March 1 to June 30, 2020.
How to proceed with the declaration?
There are several ways to proceed the IIT Reconciliation:
What if a taxpayer receives income from abroad?
Foreigners who reside in mainland China for six consecutive years will be subject to taxation on their worldwide income nonetheless, if they spent more than 30 consecutive days at any point during the six years, the computation restarts (six years rule).
Therefore, if a taxpayer has received income from abroad needs to:
About GWA Greatway Advisory
GWA is an international consulting law and tax firm based in China, with headquarters in Shanghai and offices in Beijing, Hong Kong and Bergamo (Italy).
With its 15 years’ experience in China and a deep knowledge of the Italian and Chinese law and tax landscape, GWA offers a comprehensive service to both Italian companies in China and Chinese companies in Italy.
The full article is available here.