Announcements concerning the 2019 annual filing of individual income tax (IIT) and the coronavirus pneumonia (COVID-19) epidemic

Announcements concerning 2019 annual IIT filing

The first annual filing season (1 March 2020 to 30 June 2020) is fast approaching. Announcement [2019] No. 44 and Announcement [2020] No. 3 were issued in order to stipulate more detailed rules.

It is still worth noting that annual IIT filing is only applicable for tax residents who receive consolidated income (wages and salaries, service remunerations, authorship remuneration and royalties). For non-tax residents, the IIT should be filed on a monthly basis. If their IIT is not properly filed during the monthly filing, backlog filing on a monthly basis will be required, which may involve necessary late payment interest and/or penalties.

The detailed provisions introduced in the aforementioned two rules are as follows:

1. Taxpayers who are Chinese tax residents, receive consolidated income, and have prepaid tax, are not required to perform the annual settlement if one of the following circumstances is met:
    
   • Supplementary filing is required after the annual reconciliation but the total annual consolidated income does not exceed RMB 120,000;
   • Supplementary filing is required after the annual reconciliation but the figure due does not exceed RMB 400;
   • The prepaid tax amount matches the annual tax payable or the taxpayer does not apply for the tax refund.
      
2. Allowable deductive items that can be claimed during the annual settlement:
    
   • Major illness medical expenses;
   • Qualified charity donation;
   • Other allowable deductive items that are not fully claimed during the prepayment.
      
3. Tax residents’ foreign sourced income may be subject to China tax. If this is the case, such income should be claimed during the annual filing. The IIT paid in the country (region) where the income is sourced may be claimed as a foreign tax credit to offset the tax payable within the tax credit limit if such foreign IIT paid qualifies for the credit.
    
4. Filing period: 1 March 2020 to 30 June 2020 (non-domicile taxpayers can apply for the annual settlement before leaving China if departure is before 1 March 2020).
    
5. Filing methods:
    
   • By self;
   • By the withholding agent;
   • By entrusting a professional agent or others.
      
6. Filing channels:
    
   • Online (including APP);
   • Post;
   • On-site

Announcements concerning the COVID-19 epidemic

In order to support the prevention and control of the COVID-19 epidemic, the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) jointly issued Announcement [2020] No. 9 and 10 on 6 February 2020.The announcements provide the following beneficial tax policies, effective from 1 January 2020:

1. Individuals’ following donations to cope with the COVID-19 epidemic are fully pre-tax deductible, when required conditions are met:
   
   - Cash or articles donated through non-profit social organisations, governments at or above the county level and their departments, or other state organisations;
   - Articles donated directly to the hospitals undertaking the epidemic prevention tasks.
2. The following remunerations are tax exempted:
   
   - The temporary subsidies and bonuses obtained by medical staff and epidemic prevention workers joining in the prevention according to the government specified standards;
   - Drugs, medical supplies, protective equipment, etc. (excluding cash) distributed by entities to individuals for the prevention.