Filing of Returns of Individual Income Tax on Comprehensive Income on a Consolidated Basis in 2020

Filling of Returns of Individual Income Tax on Comprehensive Income on a consolidated basis in 2020 has started, the period of declaration is Mar 1st, 2021 to Jun 30th, 2021.

According to Announcement of the State Taxation Administration on Matters Concerning the Filing of Returns of Individual Income Tax on Comprehensive Income on a Consolidated Basis in 2020, No. 2 [2021], Resident individuals shall file their IIT returns for 2020 if they meet either requirement as follows:

(1) That their comprehensive income for 2020 is over RMB 120,000 and annual tax owed is over RMB 400; or

(2) That their tax withheld is more than the amount of tax payable for 2020 and they want to claim the refund.

A Taxpayer having prepaid his or her individual income tax in 2020 and falling under any of the following circumstances is not required to file an annual tax return on a consolidated basis:

(1) The taxpayer needs to pay taxes in arrears upon filing of annual tax returns on a consolidated basis but the annual comprehensive income does not exceed RMB 120,000.
(2) The amount of taxes in arrears to be paid by the taxpayer upon filing of annual tax returns on a consolidated basis does not exceed RMB 400.
(3) The amount of taxes that have been prepaid by the taxpayer is consistent with the amount of taxes payable for that year or the taxpayer does not claim tax refund upon filing of annual tax returns on a consolidated basis.

Who need to File Annual Tax Returns?

There are two kinds of taxpayer need to file annual tax returns: taxpayer who need to apply for tax refund and taxpayer who have payment of taxes in arrears.

In practice, the main situations need to apply for tax refund include:

1. The comprehensive income of 2020 is less than RMB 60,000 but prepaid individual income tax.
2. Taxpayer has enjoyable eligible special additional deductibles of expenditures but didn’t deduct when prepaid individual income tax.
3. Taxpayer didn’t work full year in 2020 so the deductible items didn’t fully deduct when prepaid individual income tax.
4. Taxpayer didn’t have employer and need to deduct the deductible items by filing annual tax return.
5. Taxpayer obtained remuneration for labor services, author’s remuneration, and royalties; prepaid tax rate was higher than applicable tax rate for annual comprehensive income.
6. Taxpayer didn’t enjoy tax preferential policies when prepaid individual income tax.
7. Taxpayer didn’t deduct eligible donations made to public welfare and charitable causes when prepaid individual income tax.

In practice, the main situations need to make payment of taxes in arrears include:

1. Taxpayer employed by more than two employees and deductible items were deducted repeatedly.
2. Taxpayer obtained wages and salaries, remuneration for labor services, author’s remuneration, and royalties, prepaid tax rate was lower than applicable tax rate for annual comprehensive income.

How to file annual tax returns?

Tax resident individuals may choose one of the following options to file their annual tax returns for 2020:
(1) Self-declaration
(2) Authorize the employer in China to file the tax returns
(3) Authorize a professional agent or individual to file the tax returns.

If you need further assistance on the details of tax regulations or other concerns on IIT annual tax return, please feel free to contact us.