Deadline Approaches for the 2022 Annual Individual Income Tax Filing

published on 23 May 2023 | reading time approx. 3 minutes

In February 2023, the State Administration of Taxation (STA) issued Announcement No. 3/2023 on relevant matters related to the filing of the 2022 annual Individual Income Tax return (annual IIT filing) for comprehensive income. The deadline for the declaration is 30 June 2023. The following is a summary of the main points of Announcement No. 3.

In which cases is the annual IIT filing for 2022 required?

There is an obligation to file the annual IIT return for taxpayers who meet any of the following criteria:

The taxpayer has paid too much IIT on consolidated income and wants to claim a tax refund.
The taxpayer's total annual consolidated income exceeds RMB 120,000 and more than RMB 400 has been underpaid.
The taxpayer has underpaid IIT for consolidated income, for example, due to an incorrect calculation or declaration, or because the tax withholding agent (withholder) has not fulfilled the tax payment in accordance with the law.

Taxpayers are exempt from the declaration requirement, if they have made advance payments of IIT in 2022 in accordance with the law and one of the following circumstances exists:

The taxpayer has underpaid IIT, but the total income does not exceed RMB 120,000.
The underpaid tax amount does not exceed RMB 400.
The amount of IIT already paid in advance (monthly) is equal to the amount that has to be declared in total.
Taxpayers who qualify for a tax refund but do not want to file a tax refund application.

The declaration can be made in several ways:

via the income tax mobile app;
via the tax authority's website;
Alternatively, the tax return can be submitted by mail or at the tax authority's counter.

Changes to the 2022 annual IIT filing

Generally, the 2022 annual IIT filing follows the framework of the 2019-2021 IIT filings, but includes two new tax-deductible items.

Effective January 1, 2022, the following new tax allowances apply:

An additional tax allowance of RMB 1,000 per month per child for one parent or RMB 500 per month per child for both parents for the care of children under 3 years of age.
Qualified contributions for private pension insurance can be taken into account at RMB 12,000 per year per person.

In addition, the registration requirement for equity incentives in the form of shares (including shares of foreign companies for domestic employees) and cash bonuses for technological and scientific achievements is emphasized.

Calculation of IIT payable or refundable under the 2022 annual IIT filing

For the calculation of IIT payable or refundable under the 2022 annual IIT filing, consolidated income (e.g., wages and salaries, self-employment income, royalties, and other income) is used. The formula for the calculation is as follows:

IIT to be paid or refunded = [(Consolidated income - RMB 60,000 - special tax allowances - specific additional tax deductions - other statutory deductions - qualified charitable donations) × applicable tax rate - quick deduction] - IIT paid in advance for 2022.

The taxpayer or the entity in charge of the declaration is obliged to keep the information related to the declaration (e.g. allowances and deductions) for a period of 5 years after the end of the declaration period.

Competent tax authorities

The jurisdiction of the tax authority depends on the individual circumstances. Taxpayers can choose between the following declaration methods:

Self-declaration;
Declaration on behalf of the taxpayer by the employer;
Appointment of an authorized representative (e.g. tax advisor).

If the declaration is made by the taxpayer himself, the declaration is made through the tax authority responsible for the employer. If the taxpayer has several employers, the taxpayer is free to decide with which authority the declaration is made. In case the taxpayer does not have an employer, the tax authority of the place of residence or the place of the main source of income is responsible. If the declaration is made by the employer on behalf of the taxpayer, the employer must report this to its competent tax authority.

Our recommendation

Taxpayers should use the above criteria to make a self-assessment of whether an annual IIT filing is required. In a second step, any necessary adjustments can be made. This could be the case, for example, if tax-exempt deductions can be added or additionally claimed, that were not taken into account in the monthly tax declarations. In the case of foreign employees, all tax-exempt deductions (such as rent, child education, etc.) should be declared as tax-exempt income. If there is income from different categories (e.g., wages, self-employment income, royalty income, or other income), they must be combined on the annual IIT filing and the IIT recalculated.

Do you have questions about Individual Income Tax? Feel free to get in touch!