IIT Calculation for Hong Kong and Macau Residents’ Mainland-Derived Income

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May 29 – In order to avoid ambiguities surrounding the double taxation of individuals working between Mainland China and the special administrative regions of Hong Kong and Macau, the State Administration of Taxation (SAT) issued the “Notice on Questions Regarding Tax Arrangements of Individual Employees Working in Both Mainland China and Hong Kong or Macau (SAT Notice [2012] No.16, hereinafter referred as ‘Notice’)” in April, clarifying the calculation of individual income tax (IIT) for related personnel. Continue reading…

Calculating Individual Income Tax on Annual Bonus in China

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Dec. 9 – As the year’s end is approaching, many companies in China are poised to give out annual bonuses. However, when contemplating the appropriate bonus amount, employers should pay close attention to the calculation of individual income tax (IIT) on bonuses. The State Administration of Taxation’s announcement No.9 issued in 2005 (guoshuifa [2005] No.9) provides for the method of calculating IIT on lump-sum annual bonuses as follows (assuming that the individual’s monthly salary is higher than the IIT exemption threshold):

  • IIT on lump-sum annual bonus = (lump-sum annual bonus x monthly IIT rate applicable to 1/12 of lump-sum annual bonus) – corresponding monthly quick deduction Continue reading…
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