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Taxation Questions & Answers

Topic 1:  New Individual Income Tax

Next year some wage earners in China will for the first time be asked to fill out an individual tax return. Find out if you are one of them and how to file in the Shanghai Dailys one-stop guide.

STARTING Monday, people earning more than 120,000yuan (US$15,000) a year in China will for the first time have to file an individual tax return.

To make things a little easier, Shanghai Daily has compiled this guide on how to file your tax return before the deadline.

In November, the State Administration of Taxation ruled that from next year, all people earning in China 120,000yuan or more a year must report all means of China income, including salary, royalties and dividends, in the previous taxable year, to authorities from January to March each year.  People who miss the March 31 deadline will face a fine of up to 10,000 yuan. Tax evaders will face a fine of up to five times the tax payment evaded.

However, expats dont need to pay tax for overseas income if they have been in China for less than five years. From their sixth year in China, they must pay tax for such income. Pension funds, health care funds, unemployment insurance and public housing funds are exempted from taxable income. The monthly taxable salary threshold is 4,800yuan for expats and 1,600yuan for Chinese. Individual taxpayers in Shanghai can ask employers and qualified accounting firms to report their annual tax return on their behalf, the local tax authority said earlier this month. 

The Shanghai tax authority has set up a Chinese-language hotline on 12366 for inquiries and has tax forms in English available to download form its website at www.csj.sh.gov.cn Tax return forms can also be found in post offices and at tax authority outlets in the city. 

People can file their tax returns online, but will still have to visit a tax authority office in person to get approval for an e-tax submittal.  


How to report your income?

Through the post

       1. Get a tax return form from the tax authority Website (www.csj.gov.cn), post offices or a tax authority office (two copies).
2. Go to the post office and ask for a special tax return envelope.
3. Put both completed forms in the special envelope and send it to the tax authority. The envelope must be sent by   registered mail.
4. The tax authority will send you a receipt by registered mail after they receive your form.

Reporting online

       1. Go to the tax office and show them your ID (passport will do). You will receive a code number and an approval letter allowing you to file online.
2. Log on the Website, enter the code number and complete the e-tax form. Send the application.
3. Print out a copy of the receipt that appears on screen after you send the form.

Reporting at the tax authority office

       1. Go to a tax authority office and fill out two copies of the tax return form.
2. Show your ID and file the return, along with a copy of your ID.
3. Tax officials will work out any possible tax refunds and also calculate any unpaid tax for previous years.
4. Get a receipt.


Categories of income and tax rate

-Income from wages and salaries: 5%-45%

-Income from production or business operation derived by individual industrial and commercial households: 5%-35%

-ncome from contracted or leased operation of enterprises or institutions: 20%, with a 30% deduction

- Income from remuneration for personal service: 20%, 50% more tax if taxable income is more than 20,000yuan (US$2,500) to 50,000yuan, double tax if the taxable income is more than 50,000yuan

- Income form authors remuneration: 20%

- Income from royalties: 20%

- Income from interest, dividends and bonuses: 20%

- Income from lease of property: 20%

- Income from transfer of property: 20%

- Contingent income: 20%

- Other income specified as taxable by the finance department of the State Council: 20%

 


Exemptions

Awards for achievements in science, education, technology, culture and environmental protection granted by the provincial governments, ministries and commissions under the State Council, the Peoples Liberation Army units at army level and above, and by foreign or international organizations;

- Interest income on national debt obligations and other financial debentures issued by the state;

- Subsidies and allowances received under the state uniform provisions;

- Welfare benefits, survivors pensions and relief payments;

- Insurance indemnities;

- Military severance pay and demobilization pay received by members of the armed forces;

- Settlement pay, severance pay, retirement pay and retirement living allowances received by public servants an workers under state uniform provisions;

- Income derived by the diplomatic agents and consular officers, and other personnel who are exempt form tax under the provisions of the relevant Laws of China;

-Income exempt from tax as stipulated in the international conventions to which the Chinese government is a party and in agreements it has entered into.


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