China Tax: Yearly final settlement

The Announcement of the State Administration of Taxation on “Issues concerning the self-declaration of Individual Income Tax” [2018] no. 62 issued on December 21, 2018, provides detailed information about the cases in which a taxpayer shall handle the yearly final settlement of the individual income tax, to be done between March 1 – June 30 of the year following the tax year. According to the announcement, a resident taxpayer shall handle the yearly final settlement in the following circumstances:

• he/she receives comprehensive income from two places or more, and the balance of the comprehensive income minus special deductions exceeds CNY 60,000;

• he/she receives one or more income from remuneration for personal services, income from author’s remuneration and royalty income and the balance of the comprehensive income minus special deductions exceeds CNY 60,000;

• he/she paid an amount of tax in advance during the tax year that is lower than the amount of tax payable;

• he/she applies for a tax refund;

• he/she receives overseas income (specific provisions to be announced separately);

• he/she receives income, but the withholding agent does not withhold tax; and

• he/she earns income from interest, dividends, from property leases and transfers or contingent income.

Moreover, a non-resident taxpayer shall handle the final settlement in case he/she receives income included in the comprehensive income (wages and salaries, remuneration for personal service, author’s remuneration or royalty) and the withholding agent does not withhold tax.

The taxpayer shall handle the final settlement and submit the self-declaration form for annual individual income tax with the competent tax authority in the place where his/her employer is located or in the place of domicile or habitual residence in case the taxpayer is not employed by an entity.

The Announcement also provides requirements for yearly final settlement for taxpayers receiving business income (before March 31 of the year after the year in which the income is received) and in case of house-hold deregistration.

The State Administration of Taxation will announce further specific measures for taxpayers' handling of the final settlement and the payment of tax on comprehensive income.