Taxes in China: tax calculation and refund in 2022

The State Tax Administration has published an announcement that from March 1 to June 30, 2022, resident individuals who comply with the relevant rules must complete the final calculation and payment of individual income tax on total income in 2021.


What is an annual reconciliation?

After the end of 2021, do resident individuals (hereinafter referred to as taxpayers) need to sum up four types of income, including salaries, wages, royalties and royalties? received from January 1, 2021 to December 31, 2021 (hereinafter referred to as the tax year) (hereinafter referred to as "comprehensive income"), after deducting 60,000 yuan of expenses and special deductions, special additional deductions, other deductions determined in accordance with law, and qualified contributions to public welfare and charitable purposes, the personal income tax rate on total income is applied and a quick deduction is deducted.


Calculate the final tax payable for the year, and then deduct the prepaid tax in the tax year to get the tax payable or refundable, and report to the tax authority when the tax is refunded or paid. The specific calculation formula is as follows:


Tax refundable or payable = [(Total income - 60,000 yuan - "three insurances and one housing fund" and other special deductions - children's education and other special additional deductions - other deductions determined in accordance with the law - eligible public donations welfare and charity) × Applicable tax rate - quick deduction] - withholding tax


The annual reconciliation does not include classified income, such as rental property, and income that taxpayers choose not to include in gross income for tax purposes under the law.


Under the Personal Income Tax Law, Article 3 of the Announcement clarifies the circumstances under which an annual reconciliation is required, which fall into two categories: tax refund and tax payment.


One category is taxpayers whose prepaid tax exceeds the tax payable and need to apply for a tax refund. Taxpayers have the right to apply for a tax refund in accordance with the law. If a taxpayer's prepaid amount of tax exceeds the taxable amount of tax for the tax year, he can apply for an annual tax refund in accordance with the law.


In practice, there are several typical situations that will or may generate tax incentives, mainly as follows:


1. The annual total income of the tax year is less than 60,000 yuan, but the individual income tax has been paid in advance;

2. There are special additional deductions that meet the conditions in the tax year, but in case of early payment of tax, the deduction is not declared;


3. Deduction of 60,000 yuan for expenses, special deductions such as "three insurances and one housing fund", special additional deductions for children's education, business (professional) rent and commercial health insurance, insufficient deductions for donation insurance with tax deferral;


4. Those who do not work for an employer and receive income only from wages, royalties and royalties and who need to process various pre-tax deductions through an annual reconciliation;

5. The taxpayer receives income from labor, royalties and royalties, and the withholding and prepayment rate applicable in the middle of the year is higher than the annual applicable tax rate on comprehensive income for the entire year;


6. When paying tax in advance, those who have not declared or have not fully taken advantage of the total income tax exemption, such as the personal income tax exemption for the disabled, etc.;


7. There are eligible donations to public welfare and charitable causes, but no deductions have been made for prepaid taxes, etc.


The other category are taxpayers whose prepaid tax is less than the tax payable and they must pay the tax. The duty of the taxpayer is to pay the tax in accordance with the law.


In practice, there are some common situations that lead to the need or possible need to offset the tax in the annual reconciliation, mainly the following:


1. Working in two or more departments and receiving wages, the deductible expenses (5,000 yuan per month) were repeatedly deducted from prepaid taxes;


2. In addition to wages, taxpayers also have income from wages, royalties, and royalties. After the total income of various aggregate incomes, the applicable annual aggregate income tax rate is higher than the withholding and withholding rate; and therefore on.


Can I get tax deductions?

Taxpayers may report deductions or additional deductions during the annual reconciliation period for the following pre-tax deductions that occurred during the tax year and were not claimed or deducted in full:


(1) Allowable medical expenses for serious illnesses of the taxpayer and his spouse and minor children;


(2) The right to education of the taxpayer's children, additional education, interest on a home loan or rent on housing, special additional deductions for the maintenance of the elderly, as well as deductions for expenses, special deductions and other deductions established in accordance with law;


(3) Qualified public and charitable donations from taxpayers.


Taxpayers who receive total income and business income at the same time can declare 60,000 yuan deductions, special deductions, special additional deductions, and other deductions as determined by law in total or business income, but they cannot re-declare deductions. .


What management measures in 2022?

The 2021 annual reconciliation is being held for the third time since the reform of the personal income tax system, combining complex and classification. Judging from the two previous cases, the vast majority of taxpayers can conduct it in accordance with the law, and a significant number of taxpayers apply for tax refunds through the annual reconciliation.Using tax reform dividends, there are also many taxpayers who supplement income that the tax department does not have and file annual tax returns.


At the same time, the IRS also found that a small number of taxpayers still failed to file a true return after repeated reminders from the tax authorities.


For taxpayers who are required to pay tax during the annual reconciliation period, if they do not declare and pay tax after the end of the annual reconciliation period, the tax authority collects a late fee in accordance with the law and notes it in its reports. "Personal Income Tax Statement"