China annual IIT Settlement in 2026 Is Open: Are You Ready?

China annual IIT reconciliation 2026 applies to resident taxpayers for the 2025 tax year and runs from March 1 to June 30, 2026, with filing fully open to all taxpayers from March 21 without any pre‑appointment requirement. Both Chinese nationals and qualifying foreign individuals must reconcile the tax withheld during the year against their actual tax liability. This article explains who needs to file, available deductions, key deadlines, and practical filing methods.

What is annual IIT reconciliation?

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Annual individual income tax (IIT) reconciliation, also called annual IIT settlement, is the year-end process by which China reconciles the amouny that was withheld or prepaid during the year against the amount actually owed. Think of it as China’s equivalent of filing a personal income tax return: you consolidate all eligible income, apply every deduction you’re entitled to, and either collect a refund or top up any shortfall.

The settlement covers four types of “comprehensive income”: wages and salaries, remuneration for personal services, author’s remuneration, and royalties. Investment income and business income are handled separately and are not part of this reconciliation.

Who needs to file the annual IIT reconciliation in 2026?

Under China’s IIT law, any resident taxpayer is required to complete annual IIT reconciliation if they fall into either of the following situations:

• Their prepaid tax exceeds the amount actually owed, and they want a refund; or
• Their total comprehensive income in 2025 exceeded RMB 120,000 (approximately US$16,700), and the tax shortfall is more than RMB 400 (approximately US$56).

Resident taxpayers include both Chinese nationals with a domicile in China and foreign nationals who stayed, or expect to have stayed, at least 183 days in China during the 2025 calendar year. If you are a foreign employee on a long-term assignment and you crossed that threshold in 2025, you are in scope.

There are also situations where reconciliation is technically not required, such as when the tax prepaid matches what you owe exactly, or when the shortfall is RMB 400 or below. That said, if you are owed a refund and simply choose not to apply, you forfeit it, so most taxpayers with overpaid tax have every incentive to file.

Key dates for the 2026 reconciliation period

The 2025 annual IIT reconciliation window opens on March 1, 2026, and closes on June 30, 2026. The process is divided into two phases:

• Phase I (March 1-20, 2026): Priority access for eligible taxpayers, with pre-appointment required for some channels.
• Phase II (March 21-June 30, 2026): Open to all taxpayers with no pre-appointment needed.

Foreign nationals who need to leave China before the reconciliation period opens may complete the process early, before their departure.

How is the tax refund or shortfall calculated?

The formula used in the annual IIT reconciliation is:

Tax refundable or tax to be made up = [(Annual comprehensive income – RMB 60,000 standard deduction – special deductions – special additional deductions – other deductions – qualified charitable donations) × applicable tax rate – quick deduction] – prepaid tax amount

A positive result means you owe additional tax; a negative result means a refund is due.

For more about IIT calculation, please refer to our portal guide here.

What deductions can you claim during annual IIT reconciliation?

One of the main reasons to file proactively is to capture deductions that were not applied during the year, or that need to be supplemented. The following categories of pre-tax deductions are available during the 2025 reconciliation:

• Standard deduction: RMB 60,000 per year.
• Special deductions: Qualifying social insurance contributions (basic pension, basic medical, and unemployment insurance) and housing provident fund contributions.
• Special additional deductions: Expenses for childcare (under age three), children’s education, continuing education, serious illness medical costs, housing mortgage interest, rent, and supporting elderly parents.
• Other deductions: Enterprise annuity and occupational annuity contributions, qualifying commercial health insurance premiums, commercial pension insurance, and personal pension contributions.
• Charitable donations: Qualifying donations to public welfare and charitable organizations.

If you did not declare any of the special additional deductions during the year through payroll, the annual reconciliation is your last opportunity to apply them for 2025. Make sure all documentation is in order: these records need to be kept for at least five years, as the tax authority conducts random audits.

How to file the annual IIT reconciliation

There are three ways to complete the reconciliation:

• Self-filing: You complete the process yourself through the IIT app or the e-tax bureau portal (see below).
• Employer filing on your behalf: Your employer handles the reconciliation for you. You will need to confirm and sign off on the information submitted.
• Authorized third-party filing: You sign a power of attorney and delegate the process to a qualified tax service provider or another individual. This is a common approach for foreign nationals who are less familiar with China’s tax systems or who have complex income situations.

For more details about the requirements and procedures of the three methods for annual IIT reconciliation, please read our article here.

Filing channels available in 2026

Most taxpayers will file through one of these digital channels:

• IIT app (个人所得税app): The State Taxation Administration’s official mobile app, available since 2019. After completing real-name registration, you can manage deductions, download tax payment records, and file your annual return.
• E-tax bureau for natural persons (自然人电子税务局): The web version of the IIT app, offering the same core functions through a browser.
• By mail: Paper returns can be mailed to the address published by the relevant provincial tax authority.
• In person at a tax service office: For those who prefer face-to-face assistance or cannot use digital channels.

For foreign nationals, registration on the IIT app or e-tax bureau requires a visit to the local tax bureau to obtain a registration code for real-name authentication, something Chinese citizens can do via facial recognition. If you are currently outside China, your employer may be able to obtain the registration code on your behalf, but practices vary by locality, so it’s worth checking with your local tax bureau in advance.

For more details about the channels for annual IIT reconciliation, please read our article here.

How to handle equity incentives in the annual IIT reconciliation

Equity incentives, including stock options, restricted share units, and similar instruments granted by both domestic and overseas-listed companies, require special handling. Key rules include:

• If you received equity incentives from the same employer more than once during the 2025 tax year, your employer must aggregate and withhold on a consolidated basis.
• If you received equity incentives from multiple employers, you can provide your current employer with details of prior grants so they can consolidate the withholding, or you can file a consolidated return with the tax authority between March 1 and June 30, 2026.

Employers that grant equity incentives are required to complete their own reporting and filing obligations separately. If you hold equity incentives and are unsure whether they were correctly reported, this is a good opportunity to review with your HR or finance team before filing.

Which tax authority handles your reconciliation?

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If you have an employer, your reconciliation is handled by the tax authority responsible for that employer, regardless of how you choose to file. If you have more than one employer, you can file with the tax authority for any one of them.

If you do not have a formal employer (for example, you earn primarily from freelance or consulting income), you file with the tax authority for your household registration location, your habitual place of residence, or the location of your main income source. The “main income source” is defined as the location of the withholding agent that paid you the largest cumulative amount of service remuneration, author’s fees, or royalties during 2025.

Claiming a refund or paying additional tax

If the reconciliation shows a refund is due, you’ll need to provide a valid Chinese bank account. The tax authority will process the refund to that account after reviewing and approving your return.

If additional tax is owed, payment can be made via online banking, card payment at the tax service hall POS terminal, a bank counter, or through a non-bank payment institution. If you file by mail, monitor the status of your return through the IIT app or e-tax bureau and pay promptly once the return is processed.

Common compliance mistakes to avoid

The tax authority conducts random audits throughout the reconciliation period and beyond. The following behaviors carry real risk:

• Falsely reporting special additional deductions or claiming deductions you do not qualify for.
• Splitting salaries or using informal payment arrangements to reduce IIT exposure.
• Significant discrepancies between social insurance contribution bases and the IIT declared income.
• Failing to include allowances or non-salary benefits in declared income.
• Filing under another person’s identity or misrepresenting income sources.

Records supporting special additional deductions, receipts, certificates, and other documentation must be retained for at least five years. If the tax authority audits a deduction you claimed and you cannot provide evidence, you may face back taxes and penalties.

Need help with your annual IIT reconciliation in 2026?

Annual IIT reconciliation can be straightforward for employees with a single employer and no complex income, but it gets considerably more involved for those with multiple income sources, equity compensation, or foreign income. If you have questions or need professional assistance, whether for the reconciliation process itself or for broader IIT planning, feel free to reach out to china@dezshira.com.

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