Introduction of PRC annual Individual Income Tax filing for the year 2022, with the changes compared with the previous policy

As you may know, the PRC annual Individual Income Tax (IIT) filing for 2022 is coming soon. The PRC annual IIT filing has been a tax declaration requirement since 2019. It serves as a key process to ensure taxpayers can enjoy all the deductions and tax benefits of the year and ensure the correct IIT refund or settlement.

In February 2023, the State Taxation Administration (STA) released the Announcement on handling the annual filing of comprehensive income for Individual Income Tax purposes for 2022 (the Announcement). Please find below the introduction of relevant Announcement points and our observation.

What are the changes compared with the previous policy?

Generally speaking, the Announcement continues the framework and content of the previous policy. The main changes are:

  1. Additional tax deduction allowed from the year 2022
  • Tax deduction on infant/child caring expenses

Effective 1 January 2022, taxpayers' expenses related to the care of infants and children under the age of three shall be deducted according to the standard fixed amount of RMB 1,000 per month for each infant and child.

  • Tax deduction on qualified pension payment

Effective 1 January 2022, the preferential policy on deferred tax payment has been implemented for personal pensions. The payment made by an individual to the qualified personal pension account shall be deducted on the actual basis from the comprehensive income with a cap of RMB 12,000/year.

  1. To provide better services to taxpayers, the Chinese tax authority has launched an appointment application service for 2022. If taxpayers want to make the annual IIT filing during the early period from 1 March to 20 March, they can make an appointment after 16 February through the IIT APP or website. From 21 March to 30 June, taxpayers do not need to make an appointment and can apply at any time.
  1. For qualified taxpayers with a significant decrease in their income in 2022 and applying for a tax refund, the Chinese tax authorities will provide priority to process their tax refund.

What are the key points of the annual filing of comprehensive income for IIT purposes for 2022 (the Annual IIT Filing)?

ITEM FOR THE YEAR 2022
Who PRC tax residents, i.e., residents who have stayed in China for more than 183 days in the tax year, including:
  • Chinese employees
  • Expatriate employees who stayed in China for more than 183 days during 2022
Income Comprehensive income, including:
  • Wages and salaries
  • Services income
  • Remuneration for contributions
  • Royalties
When 1 March 2023 - 30 June 2023
How
  • The taxpayer handles it by him/herself
  • Withholding agent (i.e., employer) handles it on behalf
  • The taxpayer entrusts a third party to handle it.
Exemption circumstance
  • Comprehensive income does not exceed RMB 120,000 per annum
  • The annual final tax settlement is less than RMB 400
  • No tax refund is applied, or the taxpayer gives up a tax refund.
Document archive Requirement The taxpayer shall keep relevant documents for five years from the closing date of the PRC annual IIT filing.

What is the obligation of an employer?

Similar to previous years, if an employee requests the withholding agent (employer), the employer shall handle the request or at least train and guide the employee to complete it on his/her own.

It should be noted that if the taxpayer chooses the withholding agent (employer) to handle the annual IIT filing, it needs to make a written confirmation with the employer before 30 April 2023, and at the same time, provide the employer with all relevant information and he/she shall be responsible for the authenticity, accuracy and completion of the information provided.

How can we help

Acclime China has been involved in many cases helping companies and expatriate individuals working in China with their PRC annual IIT filing and assisting them when they are being checked and reviewed by the authorities.

Please feel free to contact us for further insights and support. In addition, we can help with PRC IIT advisory as well.

Reference:

Announcement of the State Taxation Administration on handling the final settlement of general income for Individual Income Tax purposes for the year 2022

http://www.chinatax.gov.cn/chinatax/n363/c5184015/content.html

Interpretation of the Announcement of the State Taxation Administration on handling the final settlement of general income for Individual Income Tax purposes for the year 2022

http://www.chinatax.gov.cn/chinatax/n810341/n810760/c5184016/content.html