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China issues regulations on the 2020 IIT annual filing

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updated on 30 June 2021 | reading time approx. 2 minutes

  

Recently, the State Administration of Taxation (“SAT”) issued regulations on IIT annual filing for Year 2020 (hereinafter referred to as the "New Regulations"). Compared with 2019, no major changes have been made regarding key policies, such as the calculation methods and filing process, etc. However, based on the practice and experience of last year’s annual filing, the SAT has introduced some updates to the details.

   

  
 
The following is a summary of the main changes: 
 

Approach of confirmation for annual filing via employer

The New Regulations still accept that the employee authorizes his/her employer to conduct annual filing on behalf of him/her, but it is clarified that the authorization must be confirmed by both the employer and the taxpayer in advance. In addition to the traditional confirmation in written form, the New Regulations have allowed a new electronic confirmation method, i.e. the taxpayer may confirm with the employer via email, SMS or WeChat, which shall have the same legal effect as written confirmation. The electronic confirmation must be completed by 30 April.
  

Filing location for taxpayers without employer

The New Regulations specify that a taxpayer without employer may make annual filing not only at the tax authority located in his/her domicile or habitual residence, but also with the one located in where the taxpayer’s main income derives. The main income source location is defined as the location of the withholding agent from which a taxpayer obtains the largest cumulative income during a tax year, including service remuneration, author’s remuneration and royalty.
  

Tax refund and payment

The New Regulations also indicate that before applying for tax refund for 2020, taxpayers must first finalize supplementary tax payment as well as fix all the existing issues in the tax declaration for year 2019, otherwise they are not allowed to apply for the 2020 tax refund. In addition, if a taxpayer makes an over-refund or underpayment due to incorrect filing information but has timely corrected the mistakes on his/her own initiative or after being reminded by tax authorities, the tax authorities may exempt the taxpayer from penalty in accordance with the principle of "No penalty for first-time violation".
 

Declaration of foreign-sourced income

In 2019, taxpayers who obtained foreign-sourced income could only conduct their annual filing via post or on-site declaration. The New Regulations introduce for the first time the online declaration function for foreign-sourced income in the 2020 annual filing.
   
Overall, the nuanced policy updates reflect the Chinese tax authorities' experience of first annual filing under the new IIT system last year as well as considerations and improvements on the current situation. With the precondition of compliance, the annual filing process is becoming multi-channel, more convenient and comprehensible. We suggest that relevant taxpayers should pay attention to the policy changes so as to actively choose the most convenient way to complete their IIT annual filing in a timely and accurate manner.

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