Lecture on the First Final Settlement of Comprehensive Income Subject to the Personal Income Tax Ends with A Great Success

 
China's first final settlement of the personal income tax will take place from March 1 to June 30, 2020.

As the final settlement approaches, is there anything that we do not know? What does it have to do with you and me? How do we know if we are subject to the final settlement? Can I check all my income from the tax authority? What should be done if the settlement is needed? What should the employer do? What punishment will be made if we fail to perform the final settlement? As we welcome the first-ever final settlement, what are our responsibilities in understanding and paying our tax., which will eventually benefit us and the country? On January 4, 2020, IfFP Institute for Financial Planning launched a special lecture on China's first-ever final settlement of the comprehensive income subject to the personal income tax.

Mr. Ni Yonggang, director of the E-learning Department of the Shanghai Tax Management School, the Shanghai Municipal Tax Service, was invited to give the lecture. Mr. Ni has long been engaged in the teaching of tax practice and training for tax officers, and has long served as a pre-test tutor for Shanghai CTA Tax Law I and Tax Law II. In addition, he has provided various kinds of tax lectures and training for financial and tax personnel. He has deep research on goods and labor tax, enterprise income tax, personal income tax, Property act tax, tax collection and management evaluation and auditing practice in China, and has extensive teaching experience. During the lecture, Mr. Ni shared views on widely-concerned issues related to the final settlement. The following are highlights and summary of the lecture. Follow our subsequent tax lectures to learn more about tax.

 
 
Comprehensive Income settlement: Taxable Income
Mr. Ni first defined the comprehensive income of a resident. The amount of taxable income is the amount of the annual income after the expenses of 60,000 yuan in each tax year, special deduction, special additional deduction, other deduction determined in accordance with the law and qualified public welfare donations are deducted.
That is, taxable income = total income - 60,000 - special deduction - special additional deduction - other deduction - donation
At the same time, Mr. Ni introduced the concepts of income and income amount of taxable income:
The income amount of labor service income is the balance of the income after a 20% expense is deducted.
The income amount of the author remuneration income is 70% of the balance after the 20% expense is deducted.
The income amount of royalties is the balance of the income after a 20% expense is deducted.
The income amount of wage does not need deduction. For example: If the wage is RMB10,000, the income amount is RMB10,000.
For example, in 2019, Mr. Zhang earned an annual wage of RMB80,000, a labor service income of RMB40,000, an author remuneration income of RMB20,000, totaling RMB140,000. The income amount of Mr. Zhang in 2019 is RMB80,000+40,000x (1-20%) +20,000x (1-20%) x70%= RMB123,200.

Other deduction: Commercial health insurance
In addition to the tax calculations, Mr. Ni suggested that people pay attention to individual insurance products that conform to tax reduction policies to prevent excessive tax payment. Pre-tax deduction is allowed in the current year (month) when the taxable income is calculated. The maximum deduction is RMB2,400/year (RMB200/month).
He also pointed out that only the insurance products with the following marks are eligible for the deduction.
(Tax deduction code)

One-off annual bonus tax calculation method
Many people pay attention to the tax calculation of the one-ff annual bonus. Mr. Ni also shared with us the annual bonus tax calculation method. One-off annual bonus receive by taxpayers from 2019 to 2021 are subject to the personal income tax based on the following calculation method:  Divide the annual bonus by 12 and determine the applicable tax rate based on the translated comprehensive monthly tax rate form.
 
Comprehensive Monthly Tax Rate Form
Example: A person received an one-off annual bonus of RMB36,000 in 2019 and chose to calculate the tax separately.
Based on the form it can be calculated as follows: RMB36,000/12=RMB3,000. The tax rate of RMB3,000 is 3% and the quick deduction amount is 0.
The tax on the annual bonus should be RMB36,000×3%-0= RMB1,080.
Since the tax on the annual bonus is calculated separately, the taxpayer does not need to pay tax if the income of the whole year is low. Therefore, the state provides that taxpayer can also choose to add the annual bonus to the comprehensive income and calculate the personal income tax.
Benjamin Franklin once said: "In this world nothing can be said to be certain, except death and taxes." The ultimate goal of tax planning is wealth planning. A complete, professional wealth planning program that benefits everyone. The tax lecture can strengthen the awareness of tax planning. However, wealth management is not just tax. In the future, IfFP China will sponsor various wealth management lectures, such as financial planning, investment, equity, law, etc., and develop deep learning courses on tax issues. If you are interested in wealth management, follow our WeChat Official Account and contact our consultants.