Dongguan Clarifies Terms for IIT Declaration

October 11, 2011 Posted by China Briefing Reading Time: 3 minutes

Oct. 11 – The Dongguan Municipal Local Taxation Bureau issued a notice explaining certain terms in the individual income tax (IIT) declaration process. These terms are: (1) “The income period,” (2) “The period to which the income belongs,” and (3) “The period to which the tax payment belongs.” These terms are explained below.

“The income period” refers to the time that the withholding agent paid the taxable income to the taxpayer, i.e., the month in which the income was distributed.
“The period to which the income belongs (start)” and “The period to which the income belongs (end)” refers to the period to which the taxpayer’s income belongs. For income from wages and salaries, manufacturing and operation, and labor services, it can be generally interpreted as the period of time during which the person inputs labor in exchange for the income; for author’s remuneration, it refers to the date that the work is published in the form of books or periodicals; for income from royalty and property leasing, it refers to the period of time during which such usage right is provided in exchange for such income; for random income, it refers to the date the taxpayer receives the relevant award, or wins the prize or lottery; with regard to interests, dividends and bonuses, it refers to the period of time the equity or debt is held for the purpose of calculating interest, or the period of time to which the post-tax profit upon which the shareholders conduct distribution belongs.)
“The period to which the tax payment belongs” refers to the time the taxpayer receives taxable income and thus incurs tax payment obligation. The taxpayer incurs tax payment obligation at the same time that the withholding agent pays the taxable income, as such, from the time perspective, “The income period” and “The period to which the tax payment belongs” refer to the same time period.

Example
Xinye Real Estate Company (“Xinye”) issued the salary payment for July in August 2011, and declared the withheld IIT in September. As such, in the September IIT Detailed Declaration Form filled out by Xinye, “The income period” should be August 2011, while “The period to which the income belongs (start)” is July 1, 2011, while “The period to which the income belongs (end)” is July 31, 2011. In addition, the system will automatically define “The period to which the tax payment belongs” as August 1-31, 2011.

This article was originally published on the Dezan Shira & Associates online business resources library. To view the original article, and other regulatory updates, please click here.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China. For advice, please email tax@dezshira.com, visit www.dezshira.com, or download the firm’s brochure here.

Related Reading

Doing Business in China
Our 156-page definitive guide to the fastest growing economy in the world, providing a thorough and in-depth analysis of China, its history, key demographics and overviews of the major cities, provinces and autonomous regions highlighting business opportunities and infrastructure in place in each region. A comprehensive guide to investing in China is also included with information on FDI trends, business establishment procedures, economic zone information, and labor and tax considerations.

The China Tax Guide (Fifth Edition)
This popular book, fully updated with all recent tax changes and amendments, details all taxes in China affecting businesses and individuals, how to calculate the amounts due, tax registration and filing procedures, tax minimization techniques, and claiming VAT rebates. It also details good financial management techniques, handling negotiations with the tax bureau and annual audit and compliance procedures.