STA Optimizes IIT Pre-withholding Rules for Certain Taxpayers

Announcement of the State Administration of Taxation [2020] No. 19

       To further support stable employment, protect employment, promote consumption, and facilitate the construction of a new development pattern, in accordance with the relevant provisions of the "Individual Income Tax Law of the People's Republic of China" and its implementing regulations, the following matters concerning the further simplification and optimization of the withholding and prepayment methods for individual income tax for certain taxpayers are hereby announced:

       1. For resident individuals who, in the previous complete tax year, had their individual income tax on wages and salaries withheld and prepaid by the same employer every month, and whose total annual wages and salaries did not exceed RMB 60,000, the withholding agent, when withholding and prepaying individual income tax on wages and salaries for the current year, shall directly calculate the accumulated deduction based on the annual amount of RMB 60,000 starting from January. That is, in months where the taxpayer's accumulated income does not exceed RMB 60,000, individual income tax shall not be withheld or prepaid temporarily; in the month when the accumulated income exceeds RMB 60,000 and in subsequent months of the year, individual income tax shall be withheld and prepaid.

     The withholding agent shall, in accordance with regulations, handle the full‑amount withholding declaration for all employees, and indicate in the remarks column of the corresponding taxpayer in the "Individual Income Tax Withholding Declaration Form" the words "Declarations were made for each month of the previous year and the annual income did not exceed RMB 60,000".

      2. For resident individuals whose individual income tax on remuneration for labor services is withheld and prepaid using the accumulated withholding method, the withholding agent shall follow the above provisions by analogy.

      This Announcement shall take effect from January 1, 2021.

      This announcement is hereby made.  

State Administration of Taxation

December 2020

Source: State Administration of Taxation (chinatax.gov.cn)