In order to help resident foreign individuals complete 2019 annual individual income tax (hereinafter referred to as “IIT”) settlement for comprehensive income, we have prepared the following twelve frequently asked questions (FAQs) according to the Individual Income Tax Law of the People’s Republic of China and relevant regulations for reference of resident foreign individuals.
Q1：What is the annual IIT settlement for comprehensive income?
A：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 amount of taxable income shall be the total amount of income received in each year minus expenses of 60,000 Chinese Yuan, itemized deductions, additional itemized deductions, and other deductions permitted by law. The amount of taxable income multiplied by applicable progressive tax rates is the amount of tax payable. 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.
Q2：who are resident foreign individuals?
A：For the purpose of IIT, foreign individuals are natural persons who have not the nationality of the People’s Republic of China. Foreign individuals are classified as nonresident ones and resident ones.Resident foreign individuals are defined as either foreign individuals domiciled in China or non-domiciled foreign individuals who have stayed in the aggregate for 183 days or more of a tax year in China .Nonresident foreign individuals are defined as either non-domiciled foreign individuals who do not reside in China or non-domiciled foreign individuals who have stayed in the aggregate for less than 183 days of a tax year in China.In general, resident foreign individuals shall pay IIT on their worldwide income. Nonresident foreign individuals shall generally pay IIT on their income from sources within China.If foreign individuals are determined as resident individuals according to the Individual Income Tax Law of the People’s Republic of China，they are determined as Chinese nonresident individuals and resident individuals of the other Contracting State according to relevant treaty, they are eligible for tax treaty benefits according to the relevant treaty and procedure.
Q3：How do resident foreign individuals without income derived from outside China calculate tax payable for 2019 comprehensive income?
A：The steps and calculation formulas of tax payable for 2019 comprehensive income are as follows：
Step 1: amount of taxable income = total amount of annual comprehensive income－qualified deductions;
Step 2: amount of tax payable = amount of taxable income × applicable progressive tax rates; or amount of tax payable = amount of taxable income × applicable tax rate－deduction coefficient for quick calculation
Step 3: amount of tax owed or tax refundable = amount of tax payable － tax withheld.
According to relevant regulations, qualified deductions are as follows:
(1)An expense in amount of 20% of income from remunerations for independent personal services, author’s remunerations and royalties；
(2) Tax-exempt income；
(3) Basic deduction of 60,000 Chinese Yuan；
(4)Itemized deductions, such as basic pension insurance, basic medical insurance, unemployment insurance and housing provident fund paid by resident individuals；
(5)Additional itemized deductions, such as expenditures for children’s education , continuing education, medical treatment of serious diseases, home loan interest, home rents and support for elderly parents；
(6)Other qualified deductions, such as annuities, tax-preferential commercial health insurance, tax-deferred pension insurance, specific taxes and fees permitted for deduction；and
(7) Qualified charitable contributions.
Q4：Shall resident foreign individuals file tax returns for 2019?
A：Resident foreign individuals shall file their IIT returns for 2019 if they meet either requirement as follows:
(1) That their comprehensive income for 2019 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 2019 and they want to claim the refund.
In general, nonresident foreign individuals have no obligation to file annual IIT returns.
Q5：May resident foreign individuals be exempted from filing tax returns for 2019?
A：Resident foreign individuals may not file the IIT returns for 2019, if their IIT for comprehensive income has been withheld in 2019 and one of requirements as below is met:
(1) That their comprehensive income in 2019 is not more than 120, 000 Chinese Yuan;
(2) That tax owed is not more than 400 Chinese Yuan;
(3) That their tax withheld is equal to tax payable in 2019; or
(4) That they waive right to claim the refund.
Q6：When should resident foreign individuals file tax returns for 2019?
A：Resident foreign individuals should file tax returns for 2019 during the period from March 1, 2020 to June 30, 2020.
Q7：Is the income derived from outside China received by resident foreign individuals taxable?
A：If resident foreign individuals are domiciled in China, the amount of tax payable on the comprehensive income and business income inside and outside China shall be calculated on a consolidated basis respectively, additionally, the amount of tax payable on other income derived from inside and outside China shall be calculated separately.
If resident foreign individuals are not domiciled in China, the income derived from outside China and paid by organizations or individuals outside China may not be combined with the income from inside China to calculate the tax payable for 2019.
Q8：Are allowances received by foreign individuals from their employers in China taxable?
A：In general, allowances received by foreign individuals from their employers in China are taxable in the form of wages and salaries. However qualified allowances may be deducted from taxable income. According to relevant regulations, qualified allowances received by foreign individuals include items as follows:
⑴Housing allowance, meals allowance, moving expenses and laundry expenses in the form of non-cash or reimbursement on actual expenses；
⑵Reasonable traveling allowance for business trip expenses inside or outside China；and
⑶Reasonable allowances for home visits, language training expenses and children’s education expenses which are permitted and regarded appropriate by competent tax authority.
It should be noted that the eight allowances including housing allowance, language training expenses and children’s education expenses cannot be deducted in the form of additional itemized deductions if they have been exempted from taxable income during the tax year before January 1, 2022.
Q9：Can resident foreign individuals provide foreign bank accounts for tax refund?
A：Resident foreign individuals must provide bank accounts opened in China for tax refund.
Q10：What options are available for resident foreign individuals to file IIT returns for 2019?
A：Resident foreign individuals may choose one of the following options to file their annual returns for 2019:
⑵To authorize the employer in China to file the returns ;
⑶To authorize a professional agent or an organization or a person to file the returns.
Q11：Where shall resident foreign individuals file their annual IIT returns?
A：If resident foreign individuals are employed inside China and file the returns by themselves, by authorizing a professional agent or an organization or a person to file the returns, the returns must be filed to the competent tax authority of the employer. If there are two or more employers in China, the returns must be filed to one of the competent tax authorities of the employers. If resident foreign individuals are not employed in China, the returns must be filed to the competent tax authority in the place of household registration or the habitual residence of the resident foreign individuals.If resident foreign individuals employed in China choose to authorize their employers to file the returns, the employers ought to file the returns to the competent tax authority of their own.
Q12：How do resident foreign individuals file their returns?
A：Resident foreign individuals can file their annual returns in one of the following ways:
⑴To file electronically via the official mobile APP of IIT or via the website（https://etax.chinatax.gov.cn）；
⑵To mail the paper returns to the competent tax authority；
⑶To submit the paper returns to the office of the competent tax authority.