China opens 2023 individual income tax filing for residents

China - 03 / 11 / 2024

China’s State Administration of Taxation announces the 2023 individual income tax filing period for residents, detailing circumstances that a taxpayer is obliged to report, with options for self-filing, employer-assisted, or trustee handling.

From March 1 to June 30, 2024, the portal of individual income tax (IIT) annual filing for 2023 is opened. The IIT annual filing is only applicable to Chinese tax residents[1]. Non-Chinese tax residents are not required to perform IIT annual filing.

The State Administration of Taxation recently issued the "Announcement on Handling the Annual Filing and Settlement of Comprehensive Individual Income Tax in 2023" (SAT 2024 No. 2) to clarify relevant matters for 2023 IIT annual filing, including:

1. Circumstances that 2023 IIT annual filing is not required

Taxpayers who have prepaid IIT in 2023 in accordance with the law and meet one of the following circumstances do not need to complete the annual filing:
- Tax repayment is required in the annual calculation, but the comprehensive income does not exceed CNY 120,000 for the whole year;
- The amount of tax to be paid in the annual calculation does not exceed CNY 400;
- The amount of prepaid tax is consistent with the final tax payable;
- Those who meet the conditions for tax refund but do not apply for tax refund.

2. Circumstances that 2023 IIT annual filing is required

If one of the following circumstances is met, taxpayers need to conduct IIT annual filing:
- The amount of prepaid tax is greater than the final tax payable and a tax refund is applied for;
- The comprehensive income obtained in 2023 exceeds CNY 120,000 and the final tax repayment amount exceeds CNY 400.

If the applicable income items are incorrect or the withholding agent fails to perform the withholding obligations in accordance with the law, resulting in under-declaration or failure to declare comprehensive income in 2023, the taxpayer shall handle the annual filing in accordance with the law and the facts.

3. IIT deductible amount and expenses for Chinese tax residents

Taxpayers can declare or make supplementary deductions during the annual filing period, including:
- Statutory deduction of CNY 60,000, as well as special deductions of personal contributions on eligible social securities and housing funds;
- Special additional deductions for qualified infant care under 3 years old, children’s education, continuing education, serious illness medical treatment, housing loan interest or housing rent, and supporting the elderly;
- Other deductions for eligible enterprise annuities and occupational annuities, commercial health insurance, personal pensions, etc.;
- Qualified charity donations.

4. Methods of performing 2023 IIT annual filing

Handled by taxpayer himself or herself;

Handled through the employer (including units that withhold and prepay IIT on labor remuneration income according to the cumulative withholding method);
To entrust a trustee (including tax-related professional service agencies or other units and individuals) to handle the matter with a signed Letter of Authorization.

Garrigues Insights

It is commonly seen that expats working in China usually have a complex remuneration package agreed with their employers. For example, dual employment, tax equalization plan and allowances along with others. Although the laws and regulations in relation to IIT have specified the IIT treatment of different circumstances, taxpayers may find it confusing to assess the accuracy of applicability among various policies. For example, how to treat the IIT borne abroad for salary paid by the overseas employer? Whether overseas salary income is subject to Chinese IIT? On the other hand, a comprehensive understanding on the concept of taxable salary in China is vital to correctly perform the IIT annual filing by assessing whether there is any tax refund or underpaid IIT exceeding the threshold of CNY 400.00 (approximately EUR 50.00). In case that our assistance in reviewing the 2023 IIT annual filing in China or the remuneration arrangement is required, we have experienced professionals to facilitate your needs.

[1] An individual who has a domicile in China or has no domicile in China but has stayed in China for more than 183 days in aggregate in a tax year (i.e. January 1 to December 31) shall be regarded as a Chinese tax resident.