5 Things Individuals Should Know About China’s Annual Tax Return

19 May 2021

Dear Members and Friends,

The China-Italy Chamber of Commerce (CICC) is pleased to share with you an article written by our member HROne:

 

Taxes in China are sometimes complicated to understand for individuals.

The individual income tax is one of the most important taxes to consider, but it is not the only one. Other taxes have to be considered, especially when the individual also have income abroad.

In this article, we want to introduce you the 5 things that individual should know about the China’s annual tax return.


What is the China Annual Tax Return?
China implemented the annual tax return for individuals on January 1st, 2019.
Residents of China (including foreign residents) must file an annual tax return between March 1st and June 30th after the end of the fiscal year, which occurs after Chinese New Year.
This annual tax return includes:

  • calculation of revenue, remunerations, and royalties;
  • deduction of the tax paid in advance;
  • calculation of the refundable or supplemental tax due;
  • reporting to the tax authorities;
  • making of tax settlements.


When can you file the Annual Tax Return?
After Chinese New Year, you can file your annual tax return between March 1st and June 30th. Depending on your workplace, the government can ask you to file sooner, but the official deadline is June 30th of every year.


Is it mandatory to file the annual tax return?
Yes. Unless you meet one of the criteria below:

  • You are not a resident and you have resided in China for less than 183 days
  • You are a resident, but your annual income does not exceed 120,000 CNY (10,000 CNY/Month)

Failure to file your annual tax return may result in a fine depending on the amount of taxes withheld, which will be reported in your personal tax credit file. Submitting your annual tax return, on the other hand, keeps you in good standing with the government, which is always a plus when it comes to dealing with immigration and visa policies.


Will you have to pay a lot of taxes?
Good news! The short answer is (in the vast majority of cases) NO...
China has one of the lowest overseas income taxes in the world, and your local employer (if you have one) has been deducting your income tax all along. You might also be owed tax money in the form of a pay-back in some situations.
While the annual tax return re-structure was intended for local businessmen, it has proven to be beneficial to many international investors. Thousands of foreign citizens have moved to China to take advantage of the country's low overseas income tax rate as a result of the policy.
China tax returns are mostly free in the following three categories: 

  1. Income from capital gains
  2. Income from abroad
  3. Property tax

It's worth noting that the annual tax-free exemption on capital gains income is only valid for the first 90 days of employment in China. Foreigners must pay the correct income tax rate after that date has passed.
Income from abroad and property tax are not taxed in China. However, they may be required to pay certain taxes depending on their personal situation.
A permanent resident who has lived in China for five years or more can file his or her annual tax return regardless of where he or she lives.
One of the most relevant documents for Chinese citizens intending to immigrate or live in China is their tax return.
As a result, it is a requirement for all foreign citizens wishing to reside in China.

 

How do you file and submit your annual tax return in China?
Annual tax returns in China can be filed and submitted both online and offline.
You may either file online with a government app or in person at your local China tax office. Each strategy has its own set of drawbacks. Even for a local, navigating the online application is incredibly difficult, and you guessed it, the app is only in Chinese. By nature, the offline alternative is clumsy and time-consuming.

 


How HROne can help you with your annual tax return
As we have seen, filing an annual tax return is something that every individual in China must do.
The process becomes bery complicated when you have to deal not only with income generated in China, but also with income that you have abroad.
Plus, mistakes can cost you a lot ot time and money spent. 
HROne can help with all the steps to file the annual tax return, from advising you to the documents that you have to collect, to calculating taxes for you, storing and filing of the documents to local authorities, eliminating the time that you spend on this and the risks of not being compliant with the local Chinese law.
You can visit our website (www.hrone.com) or send an email to info@hrone.com for more information!

 

Kind Regards,
CICC Team

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