Official: Individual wages and salaries of residents without domicile should be incorporated into comprehensive income

category:Society
 Official: Individual wages and salaries of residents without domicile should be incorporated into comprehensive income


According to the Regulations on the Implementation of the Personal Income Tax Law, the income obtained from serving, employing, performing and other services in China belongs to the domestic income, but the rules for determining the domestic income of the unregistered individuals (hereinafter referred to as senior managers) who serve as directors, supervisors and senior managerial positions are different from those of the general unregistered employees.

On April 12, the official website of the Ministry of Finance published Answers to Individual Income Tax Policies for Non-resident and Non-resident Individuals.

The full text is as follows:

1. Question: How to divide the domestic income and the overseas income from the salaries and salaries earned by individuals without residence (excluding senior managers)?

Answer: Article 3 (1) of the Implementation Regulations of the Individual Income Tax Law stipulates that the income derived from the provision of labor services in China due to employment, employment and performance of contracts belongs to the income derived from the territory.

In order to clarify the division of wages and salaries between domestic and overseas, the Announcement of the General Administration of Taxation of the Ministry of Finance on Personal Income Tax Policies for Non-resident and Non-resident Persons (Announcement No. 35 of the General Administration of Taxation of the Ministry of Finance, 2019, hereinafter referred to as the Announcement) stipulates that: The wages and salaries earned by a person during the period of working in China are those earned from the wages and salaries in China. The working period in China shall be calculated according to the number of working days of individuals in China, and the working days abroad shall be calculated according to the number of working days in the current Gregorian calendar minus the number of working days in the current period in China. Where an individual without a domicile holds a post at the same time in a domestic or overseas entity or works only in an overseas entity at the same time in the current period, the amount of income derived from wages and salaries at home and abroad shall be calculated and determined according to the proportion of working days within or outside the territory of which the wages and salaries belong to in the current calendar days.

It should also be noted that the number of working days in China is not the same concept as the number of days actually residing in China. The bulletin stipulates that the number of working days in China includes the actual working days in China and the number of public holidays, personal holidays and training days enjoyed both inside and outside China during the working period in China. If an individual without domicile does not serve in an overseas unit, no matter whether he stays abroad or not, the number of working days abroad will not be counted.

2. Question: How to divide domestic income and overseas income when senior managers get remuneration?

Answer: According to the implementing regulations of the Individual Income Tax Law, the income obtained from serving, employing and performing the contract in China belongs to domestic income, but the rules of judging domestic income are different from those of general employees without domicile for those who are directors, supervisors and senior managerial positions (hereinafter referred to as senior managers). Executives participate in company decision-making and supervision and management, and their workplaces are highly mobile, so it is not appropriate to simply divide domestic and overseas income according to the workplaces. In this regard, the Announcement stipulates that the remuneration paid or borne by domestic resident enterprises by senior managers, whether they perform their duties in China or not, belongs to the income originating in China and should be taxed in China. For senior managers to obtain remuneration that is not paid or borne by domestic resident enterprises, they still need to be divided into domestic and overseas earnings according to their places of appointment, employment and performance.

3. Question: How to divide domestic income and overseas income when an individual without residence obtains several monthsbonus and equity incentive income?

Answer: Monthly bonus refers to the salary and salary income of a person who has no residence who once obtains bonus attributable to months (including annual bonus), year-end salary increase and bonus distribution, excluding monthly fixed bonus and one-time monthly salary.

Equity incentives include stock options, equity options, restricted stocks, stock appreciation rights, equity incentives and other discounts or subsidies from employers for subscribing to securities such as stocks.

Monthly bonus and equity incentive belong to salary income. If an individual without a domicile obtains a monthly bonus or equity incentive, he or she shall divide the domestic and overseas income according to the rules for determining the source of salary income. In view of the special circumstances of monthly bonuses and equity incentives, the Announcement further elaborates the provisions on the basis of the rules for determining the source of salary income:

One is the monthly bonus or equity incentive income received by an individual without a domicile while performing his or her duties in China. If the income is attributed to the period of working abroad, it is still the salary and salary income from abroad.

Secondly, after a domiciled individual ceases to perform his or her duties in the territory or leaves the country, he or she receives monthly bonuses or equity incentives attributable to his or her work in the territory, which are still income from the territory.

Third, if an individual without a residence obtains several monthly bonuses or equity incentives from domestic or overseas units within one month, and the monthly bonuses or equity incentives belong to different periods, the income of each monthly bonus or equity incentive shall be calculated separately according to the ownership period of each monthly bonus or equity incentive, and then the total monthly bonuses within the same month shall be added. Income from gold or equity incentives.

It should be noted that the monthly bonuses and equity incentives earned by senior managers are divided into domestic and overseas earnings according to the rules of salary income of senior managers.

For example, Mr. A is a person without a residence. In January 2020, Mr. A received a bonus for the fourth quarter of 2019 (92 days in the Gregorian calendar) and a bonus for the whole year. Assume that Mr. A gets a quarterly bonus of 200,000 yuan, corresponding to 46 working days in China, and 500,000 yuan for the whole year, corresponding to 73 working days in China. The two bonuses are paid by domestic companies and foreign companies in half respectively. (excluding tax agreements)

In 2020, Mr. A lived in China for no more than 90 days and was a non-resident individual. Mr. A only calculated the taxable income in China on the domestic income paid in China. Mr. As taxable income from monthly bonuses in China is as follows:

=10 million yuan

4. Question: How to calculate the amount of taxable income in China when an individual without a domicile obtains wages and salaries?

Answer: According to the rules of source of income, salary and salary income obtained by individuals without domicile can be divided into domestic and overseas salary income; on this basis, according to different places of payment, domestic salary and salary income can be further divided into domestic employers payment or burden (hereinafter referred to as domestic payment) and overseas employers payment (hereinafter referred to as overseas payment); overseas salary and salary income can also be divided into domestic employers payment or burden (hereinafter referred It can be divided into income paid in China and income paid abroad. To sum up, the income of salary and salary of an individual without domicile can be divided into four parts: domestic income paid in China, domestic income paid abroad, overseas income paid in China and overseas income paid abroad.

Individuals without domicile shall determine the scope of tax liability for salary and salary income according to the length of their residence in the territory. For example, income from wages and salaries earned by an uninhabited individual who has lived in China for no more than 90 days shall be taxable only on domestic income paid in China; income from wages earned by an uninhabited individual who has lived in China for more than 90 days and less than 183 days shall be taxable on all domestic income (including domestic and overseas payments).

Before the amendment of the Individual Income Tax Law, when an individual without a domicile obtains salary and salary income, the taxable amount shall be calculated by the method of tax first and then distribution. That is to say, the taxable amount shall be calculated according to the total salary and salary income obtained by the taxpayer both at home and abroad, and then the tax amount shall be divided according to the working hours at home and abroad and the proportion of income paid at home and abroad, and the taxable amount shall be calculated and determined

After the amendment of the Individual Income Tax Law, the income of salaries and salaries of the residents without residence should be incorporated into the comprehensive income, and the tax amount should not be calculated separately. It is difficult to continue to adopt the method of tax before tax. The Announcement readjusts the taxation method to tax after tax. That is to say, according to the working hours at home and abroad and the proportion of income paid at home and abroad, the amount of salary and salary income should be divided and calculated at home. Taxable salary and salary income shall be calculated accordingly. After the adjustment of Taxation method, the applicable tax rate is determined only for the domiciled individuals taxable income in China, which reduces the applicable tax rate and tax burden and makes the taxation method more reasonable.

The calculation of taxable wage and salary income in the territory of an individual without a domicile can be divided into the following four situations:

Situation 1: If an uninhabited individual resides in China for no more than 90 days, the amount of salary and salary income paid in China during the working period shall be the amount of taxable salary and salary income in China.

Circumstances 2: If a person without a residence has lived in China for more than 90 days and less than 183 days, the amount of salary and salary income accrued within the country (including domestic and overseas payments) that he obtains from the country is the amount of salary and salary income accrued within the country.

Circumstances 3: If a person who has no domicile resides in China for 183 days for less than six consecutive years and meets the preferential conditions stipulated in Article 4 of the Implementation Regulations, the overseas income paid abroad shall not be included in the domestic taxable wage and salary income, and shall be exempted from tax. All domestic income (including domestic and overseas payments) and overseas income paid within the territory of China shall be taxable within the territory of China. Salary income.

Circumstances 4: If a person without a residence has lived in China for 183 consecutive years for six consecutive years and does not meet the preferential conditions stipulated in Article 4 of the Implementation Regulations, all the salary and salary income obtained from both domestic and overseas shall be included in the domestic taxable salary and salary income.

If an individual without a residence obtains several salary and salary incomes corresponding to different attribution periods within one month, the amount of tax accrued in the territory for each salary and salary shall be calculated separately according to the attribution period of each salary and salary income, and then the total amount shall be calculated as the salary and salary income of the current month.

If the tax agreement provides otherwise, it may be handled in accordance with the provisions of the tax agreement.

5. Question: How to calculate the amount of taxable income in China when a person without a residence is a senior executive?

Answer: The Announcement stipulates that the salary and salary income paid or borne by senior managers in China, whether they perform their duties in China or not, belongs to the income originating in China. The method of calculating the taxable income of the salary and salary of the senior managers who are residents is the same as that of other non-residents. If the senior managers are non-residents, they get the salary and salary income paid or borne by the domestic resident enterprises. The method of calculating the taxable salary and salary income of the senior managers in China is different from that of other non-residents, as follows:

Situation 1: If the senior managers live in China for no more than 90 days in a tax year, the total income paid in China shall be counted as the salary income taxed in the country.

Circumstances 2: If a senior executive resides in China for more than 90 days and less than 183 days in a tax year, the salary and salary income taxed in-country shall be calculated in respect of all the income paid in the country and the income paid in the country abroad.

If the tax agreement provides otherwise, it may be handled in accordance with the provisions of the tax agreement.

6. Question: How to calculate the tax payment when an individual without a residence obtains a comprehensive income?

Answer: The Announcement stipulates that after the end of the year, the annual salary income, service remuneration income, manuscript remuneration income and royalty income should be aggregated to calculate and pay individual income tax. Where settlement and settlement are required, settlement and settlement shall be conducted in accordance with the law.

Individuals without residence may enjoy special additional deductions when calculating the total income. Among them, when calculating the salary and salary income before January 1, 2022, residents without residence are foreigners, they can choose to enjoy eight preferential subsidies, such as housing allowance, childrens education fee and language training fee, or special additional deduction policy, but they can not be enjoyed at the same time.

7. Question: How to calculate personal income tax for non-resident individuals who receive monthly bonuses or equity incentives?

Answer: According to the provisions of the Individual Income Tax Law, non-resident individuals get salary income and pay individual income tax monthly. If they get bonus or equity incentives for several months, if they are also taxed on a monthly basis, there may be a problem of excessive tax burden. From a fair and reasonable point of view, they should be allowed to share the bonus and equity incentives for a certain period of time to calculate tax payment. Considering that the cumulative residence time of non-resident individuals in one year does not exceed 183 days, i.e. the maximum is about 6 months, the Bulletin stipulates that non-resident individuals are allowed to obtain bonuses or equity incentives for several months, and the tax amount is allowed to be assessed within 6 months. It not only reduces the tax burden, but also is easy to do.

If a non-resident individual obtains bonuses for several months, he shall calculate the domestic taxable wage and salary income in accordance with the provisions of the Announcement. It shall not be combined with other wage and salary income of the same month, and shall be apportioned according to six months without deduction of expenses. The monthly tax rate table shall be applied to calculate the taxable amount. The method of assessed taxation can only be used once per year by each non-resident individual.

If a non-resident individual obtains equity incentive, he shall calculate the domestic taxable wage and salary income in accordance with the provisions of the Announcement. He shall not merge with other wage and salary income of the same month, and shall be apportioned for six months without deduction of expenses. The monthly tax rate table shall be applied to calculate the taxable amount. Where a non-resident individual obtains multiple equity incentive income within a tax year, the tax shall be calculated in combination.

Where an individual without a residence obtains a one-time bonus or equity incentive income for the whole year, the relevant provisions of the Notice of the General Administration of Taxation of the Ministry of Finance on the Linkage of Preferential Policies after the Amendment of the Personal Income Tax Law (Fiscal and Tax [2018] 164) shall be followed.

For example, Mr. B is a person without residence. He lived in China for less than 90 days in 2020. In January 2020, Mr. B obtained 400,000 yuan of equity incentive income paid in China, including 120,000 yuan of income attributable to working in China. In May 2020, he obtained 700,000 yuan of equity incentive income paid in China, including 180,000 yuan of income attributable to working in China. Taxation of equity incentive income. (excluding tax agreements)

In January 2020, Mr. Bs taxable amount=[(120000 6)*20%-1410]*6=15540 yuan

In May 2020, Mr. Bs taxable amount={(120000+180000]6)*30%-4410}*6-15540=48000 yuan

8. Question: How do individuals without residence enjoy the treatment of tax agreements?

Answer: The Announcement stipulates that if a person without a residence is a tax resident of the other party (hereinafter referred to as the tax resident of the other party) in accordance with the terms of the tax agreement (including the tax arrangement signed between the Mainland, Hong Kong and Macao), even if he or she is a tax resident of China according to the provisions of the tax law, he or she can also choose to enjoy preferential treatment in accordance with the provisions of the tax agreement. The main preferential treatment includes:

One is the agreement treatment of overseas employment income. According to the employment income clause in the tax agreement, the employee income obtained by the taxpayer of the other party who engages in employment activities abroad may not pay personal income tax, only the domestic income shall be counted as the salary and salary income taxed in the country of entry, and the personal income tax shall be calculated and paid.

Second, the agreement treatment of domestic employment income. According to the employment income clause in the tax agreement, if the number of days of stay in the territory of the tax residents of the other party does not exceed 183 days within the period stipulated in the tax agreement, they shall engage in employment activities to obtain employment income, and only the domestic income paid in the territory shall be counted as the income of wages and salaries taxed in the territory of entry, and the personal income tax shall be calculated and paid.

Third, the treatment of independent individual labor service or business profit agreement. According to the clause of independent personal service or business profit in the tax agreement, if the taxpayer of the other party obtains independent personal service income or business profit, and meets the conditions stipulated in the tax agreement, he or she may not pay personal income tax.

Fourth, the provisions of directorsfees. If the tax residents of the other party are senior managers, the relevant provisions of directorsfees clauses in the tax agreement shall be given priority to the directors fees, supervisory fees, salaries and other similar remunerations obtained. If the tax residents of the other party do not apply the terms of directorsfees, they shall be dealt with in accordance with the provisions of the terms of employment income (non-independent personal services), independent personal services or operating profits in the tax agreement.

Fifth, the agreement treatment of royalties or technical service fees. According to the royalty clause or technical service fee clause in the tax agreement, the royalty or technical service fee obtained by the taxpayer of the other party shall be calculated according to the amount of taxable income and the proportion of taxation not exceeding the amount stipulated in the tax agreement. The Announcement stipulates that when an individual without a residence is judged as a tax resident of the other party according to the resident clause of the tax agreement and chooses to enjoy the treatment of the agreement, he or she may calculate the tax payable separately according to the amount and proportion of the taxable income stipulated in the tax agreement, and not incorporate the comprehensive income into the calculation of tax payment.

Individuals who are judged to be residents in accordance with the domestic tax law may enjoy the agreed treatment when withholding advance payment and remittance and settlement payment, and those who are judged to be non-residents in accordance with the domestic tax law may enjoy the agreed treatment when gaining income.

9. Question: When making the first annual declaration, how can an individual without residence decide whether he is a resident or a non-resident?

Answer: At the time of the first annual declaration, the actual number of days of residence of an individual without residence in the territory was less than 183 days, and it was temporarily impossible to determine whether he was a resident or a non-resident individual. In order to reduce the taxpayers tax compliance cost, the Announcement gives the non-domiciled individual the right to choose the status of tax resident in advance. Specifically, when a domiciled individual first declares in a tax year, he or she shall, according to the contract agreement and other circumstances, decide by himself that he or she is a resident or a non-resident individual, and make the declaration in accordance with the relevant provisions. When the predicted situation does not conform to the actual situation, the individual without residence shall adjust according to the provisions of the Notice.

10. Question: What obligations should domestic employers fulfil when a domiciled individual serves in China and obtains wages and salaries paid by overseas units?

Answer: Some of the salary and salary earned by a domiciled individual while serving or being employed in China are paid by the overseas affiliates of his employer in China. In this case, although domestic employers are not the direct payers of salaries and salaries, in order to facilitate tax compliance, according to the relevant provisions of the Announcement, individuals without domicile may choose to declare and pay their own taxes within a tax year, or entrust domestic employers to pay taxes on their behalf. If a domiciled individual fails to entrust a domestic employer to pay taxes on his behalf, the domestic employer shall have the obligation to report the relevant information to the competent tax authorities within 15 days after the end of the relevant income payment month.

Where an individual without a domicile chooses to entrust a domestic employer to pay tax on his behalf, the domestic employer shall calculate the tax payable in accordance with the relevant provisions of Articles 6 and 9 of the Administrative Measures for the Deduction and Declaration of Individual Income Tax (Trial Implementation) (Announcement No. 61 of the State Administration of Taxation, 2018), fill in the Individual Income Tax Deduction Declaration Form, and tax the relevant income within 15 days after the end of the month of payment. The administrative organ handles tax declaration. Where an individual without a domicile chooses to declare and pay taxes on his own, he shall calculate the tax payable in accordance with the relevant provisions of Article 9 of the Measures for the Administration of the Deduction and Declaration of Individual Income Tax (Trial Implementation) (Announcement No. 61 of the State Administration of Taxation, 2018), fill in the Individual Income Tax Self-Tax Declaration Form (Form A), and pay taxes to the employer in charge within 15 days after the end of the month when he obtains the relevant income The organ handles its own tax declaration.

11. Question: How to determine the domicile of an individual with a domicile in China?

Answer: The so-called residence in the tax law is a specific concept, which is not equivalent to housing in the physical sense. According to Article 2 of the Implementation Regulations of the Individual Income Tax Law, individuals who have domiciles in China refer to those who habitually reside in China because of their household registration, family and economic interests. Customary residence is a legal criterion to determine whether taxpayers are residents or non-residents. It does not refer to the actual residence or residence in a specific period of time. For an individual who resides abroad for reasons such as study, work, visiting relatives and tourism, and who returns to live in China after these reasons have been eliminated, China is the habitual residence of the taxpayer, that is to say, the individual belongs to the domicile of the taxpayer in China.

For an overseas individual who resides in China only for reasons of study, work, family visits, tourism, etc., if the above reasons are eliminated and the overseas individual still returns to live abroad, his habitual residence is not in China. Even if the overseas individual purchases housing in China, he will not be recognized as an individual with domicile in China.

Source: Shi Jianlei_NBJ11331, responsible editor of Beijing News