Annual IIT Reconciliation of 2021 Starts on 1 March 2022

Annual Individual Income Tax (IIT) reconciliation of 2021 will start on 1 March 2022 to be due on 30 June 2022. From our experiences in the annual IIT reconciliation for the past two years, we kindly recommend individual taxpayers in China to pay attention to the following issues when performing the third annual IIT reconciliation since the IIT Law reformation in China:

1. If you have individual income derived from two sources within in China falling into the categories of salary income, labor service income, royalty income and author’s remuneration, you should combine all the income for a consolidated filing in the annual IIT reconciliation for a tax re-calculation.
2. For Chinese resident taxpayers who have worldwide income tax payment obligation in China, any foreign-sourced income should also be reported in the annual IIT reconciliation period. Herein double tax treaty between China and the foreign country should be noted, in case of tax credit and tax exemption.
3. For foreign employees working in China, it should be particularly noted that any tax exempted benefits such as housing or children’s education allowances, even if paid by the Chinese employers directly, should be reported in the annual IIT reconciliation as tax-exempted employment income. In such case foreign employees should not make the special additional deduction anymore, such as elder parents supporting fee, etc. in their IIT calculation.