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IIT SERIES 3 – PRE-TAX DEDUCTIONS, SPECIAL ADDITIONAL DEDUCTIONS AND OTHER DEDUCTIONS


4 June 2020 | Human Resources, IIT | Written by Dr. Richard van Ostende | Reading time: 4 minutes


INTRODUCTION

Per 1 January 2019 China’s amended Individual Income Tax Law (hereinafter referred to as “IIT Law”) entered into effect. According to the provisions of the IIT Law, individual residents (hereinafter referred to as “taxpayers”) are required to annually calculate their final income tax payable and must handle their annual settlement. 2020 marks the first-time taxpayers have to handle the annual settlement in accordance with the new law. Between 1 March and 30 June 2020 annual settlement must be performed for the period of 1 January to 31 December 2019.

In our previous articles we discussed what comprehensive income and annual settlement is and to whom it applies as well as how taxation of resident individuals is calculated. In this third article of our IIT Series the available deductions which reduce the taxable income are discussed in detail.


DEDUCTIONS

When calculating the taxable comprehensive income for resident individuals the following personal deductions are allowed to be processed:

  Resident individuals are individuals having a residence in China or having no residence in China and having         resided in China for a total of 183 days in a tax year (which follows the Gregorian calendar from 1 January to 31         December).


Basic standard deduction

Per 1 January 2019 the amount of the standard basic deduction is RMB 60.000 per year, or RMB 5.000 per month for calculation of provisional individual income tax withholding purposes.


Specific deductions

Employer and employee social security contributions made in accordance with the Social Security Law, as well as contributions to the statutory Housing Fund are deductible for individual income tax purposes.


Special additional deductions

Residents individuals with comprehensive income can, if eligible, claim the following specific additional deductions when calculating the annual taxable income:



The information in this article is intended for general information on the subject matter. The content of this article is not intended to replace professional advice on the subject matter in relation to your specific circumstances.

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