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China: Guidance on annual income tax reconciliation for individual taxpayers

China: Income tax reconciliation, individual taxpayers

The Ministry of Finance and the State Taxation Administration in December 2019 released guidance (known in English as “Announcement 94”) concerning the policies regarding the annual income tax reconciliation for individual taxpayers. The tax administration also released a consultation document concerning the annual comprehensive income tax reconciliation.


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Announcement 94 and the consultation document are the first guidance documents following the publication of rules in 2018 to implement the individual income tax law and individual income tax self-declaration regime (as contained in Announcement 62 of 2018). 

Announcement 94 and the consultation document include requirements on the 2019 annual income tax reconciliation with respect to:

  • Relevant taxpayers and income types
  • Circumstances under which no annual reconciliation is required
  • Circumstances under which an annual reconciliation is required
  • Timeframe for annual reconciliation filing
  • Filing process and where to file

KPMG observation

Announcement 94 and the consultation document continue to reflect the intention of the 2019 individual income tax reform—that is, to reduce the tax burden and lower the administrative obstacles for taxpayers while empowering the enforcement by the tax authorities. Tax withholding agents will play a key role in the collection of individual income tax in China. The consultation document clarifies that when individual taxpayers request withholding agents to facilitate their annual reconciliation filing, the withholding agent is to provide the necessary assistance. As the key communication channel between taxpayers and the tax authorities, withholding agents are to proactively communicate the relevant policies and provide guidance to employees, and define business processes so that the annual reconciliation can be completed in a timely manner. When necessary, withholding agents may seek assistance from professional organisations so that their legal obligations can be effectively fulfilled.

The amended individual income tax law provides for itemised deductions and the concept of comprehensive income, which demands for taxpayers to be more aware of the tax regulations (compared to the old tax system). Individual taxpayers are responsible for the truthfulness, accuracy, and completeness of the information reported to the tax authorities. Taxpayers need to review the accuracy of their declared itemised deductions, assess whether they are required to file the annual reconciliation based on their personal circumstances, and complete the filing process in a timely manner. 

Further guidance is expected from the tax authorities concerning:

  • Whether withholding agents or tax professionals can assist with tax refund application for non-domiciled resident individuals who have already left China and no longer maintain a Chinese bank account
  • Documentation requirements, process, and timeline for tax refund applications
  • Reporting requirements for resident individuals who received comprehensive income outside of China during 2019

For more information, contact a KPMG tax professional:

David Ling | +1 609 874 4381 |

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