Annual Individual Income Tax Filing in China - What You Need to know?

Mar 3 2023
SBA Stone Forest

It is expected that from 2023 onwards, individual income tax ("IIT") in China will be more closely monitored through the use of Big Data technologies, especially in light of the recent introduction of the Golden Tax System Phase IV.

The annual IIT filing for year of assessment 2022 will commence from March to June 2023.

It is expected that the Golden Tax System will help to make desktop audits more efficient and help tax authorities in China to select audit targets more accurately. Resident individuals with incomplete or non-compliant IIT filings are more inclined not to take risks during tax audits.

Any resulting tax disputes that arise during the tax audit process can have a significant impact on the tax credit rating of the resident individuals' employer. Often, the tax disputes result in tax adjustments and penalties for the resident individuals and/or the employers. To mitigate the risks of such tax disputes for employers and employees, fulfilling IIT filing requirements is crucial from both the employer's and the employee's perspective.

Pursuant to the provisions of the Individual Income Tax Law, a resident individual (hereinafter referred to as "taxpayer") is required to consolidate four types of incomes (hereinafter referred to as the "comprehensive income"):

  1. Income of wages and salaries,
  2. Income of remuneration of services,
  3. Income of author's remuneration; and
  4. Income of royalties which are derived for the period from 1 January to 31 December

A resident individual refers to a China-domiciled individual who reside in China, and a non-domiciled individual who reside in China for 183 days or more in a calendar year.

Who must declare annual IIT?

Resident taxpayers whose annual comprehensive income exceeds RMB 120K are obligated to declare annual IIT, if any one of the following criteria are met -

  1. The IIT underpayment exceeds RMB 400; or
  2. The prepaid IIT is eligible for a refund application and needs to apply for the same.

How to complete the annual IIT filing?

  1. By the individual himself
  2. By the employer
  3. By other authorised bodies or individuals

Other China updates

Accounting & Taxation

  • In January 2023, the Shanghai Municipal Tax Service, State Taxation Administration issued a notice stating that newly registered taxpayers in Shanghai will be included in the pilot program for issuing fully digitised e-fapiao. As a result, taxpayers in Shanghai will no longer be able to apply for special or ordinary VAT fapiao from the dates when they are included in the pilot program.
  • Small-scale taxpayers, whose monthly sales amount to not more than RMB100,000 (inclusive), are exempted from VAT in year of assessment 2023.

  • The taxable sales revenue of small-scale VAT taxpayers on which a levy rate of 3% is applicable, shall be subject to VAT at a reduced levy rate of 1%; and the pre-payment VAT items on which a pre-levy rate of 3% is applicable, shall be subject to a reduced pre-levy rate of 1% for the year 2023.

Human Resources

  • Shanghai Lingang is a special economic zone located in the southeast of Shanghai, China. It recently announced the release of its “Measures for Settlement Subsidies for Talents in Frontier Industries in Lingang Special Area.” The measures provides subsidies ranging from RMB 10,000 to RMB 100,000 to qualified talents from key enterprises in frontier industries. The policy became effective on July 1, 2022 and will be valid until December 31, 2025. 

Corporate Governance

  • The National People’s Congress (NPC) passed an amendment to China’s Foreign Trade Law on December 30, 2022, abolishing Article 9 of the Foreign Trade Law of the People's Republic of China, which required certain filing and registration procedures for foreign trade operators. From December 30, 2022 onwards, local commerce authorities ceased handling the registrations of foreign trade operators.

If you would like to speak to our specialists, please contact:
Tan Lee Lee
Head of China

Rita Boyle
Director, Business Advisory, International Desk

Yeo Lee Soon
Director, China Business Advisory, Singapore