What is the annual IIT settlement for comprehensive income
According to relevant regulations, comprehensive income received by resident individuals includes income from wages and salaries, remunerations for independent personal services, author’s remunerations and royalties. When resident individuals receive any type of income mentioned above, the IIT shall be withheld respectively. After the end of the tax year, the resident individuals shall calculate the annual taxable IIT on a consolidated basis. The balance of tax payable minus tax withheld is tax owed or refundable. The resident individuals should file annual IIT returns to pay tax owed or claim refunds.
Resident individual vs Non-resident individual
A resident individual refers to an individual who is domiciled in China, or an individual who is not domiciled in China but has resided in China for an aggregate of 183 days or more within a tax year (from January 1 and end on December 31 within a calendar year).
Being domiciled in China, as mentioned in the tax law, refers to habitual residence in China because of household registration, family, or economic involvements, instead of the actual residence or the residence in a particular period.
A non-resident individual refers to an individual who is not domiciled in China and does not reside in China, or an individual who is not domiciled in China but has resided in China for less than an accumulated 183 days within a tax year.
For individuals who reside outside China for studies, work, family visits, or tours, and will return to and reside in China after such activities, China shall be these taxpayers’ habitual residence, which means the individuals are domiciled in China. For foreign individuals who reside in China for studies, work, family visits, or tours, and will return to and reside in their homeland after such activities, China shall not be their habitual residence. Even if such a foreign individual buys a house in China, he or she may be not recognized as an individual being domiciled in China.
The total number of days of residence in China in a tax year for an individual not domiciled in China shall be the total number of days he or she stays in China. A day when an individual stays in China for 24 hours will be counted as one day of residence in China. A day when an individual stays in China for less than 24 hours will not be counted as one day of residence in China.
In general, nonresident foreign individuals have no obligation to file annual IIT returns.
Resident foreign individuals shall file their IIT returns for 2023 if they meet either requirement as follows:
(1) That their comprehensive income for 2023 is over 120,000 Chinese Yuan and annual tax owed is over 400 Chinese Yuan; or
(2) That their tax withheld is more than the amount of tax payable for the year 2023 and they want to claim the refund.
When should resident foreign individuals file tax returns for 2023?
Resident foreign individuals should file tax returns for 2023 during the period from March 1, 2024 to June 30, 2024.
