[preface] since March 1, the settlement and payment of personal income tax in 2024 has started again, and "tax refund" or "tax supplement" has become a hot topic for a while. Although in China's tax system, personal income tax is not a big tax, accounting for less than 10% of the total tax revenue, it is the tax most closely related to every common people. This article will focus on the topic of [compliance] of personal income tax and remittance.

1. the Past Life of Personal Income Tax

On September 10, 1980, the National People's Congress promulgated the first "Individual Income Tax Law" in the People's Republic of China, with a tax threshold of 800 yuan. Based on this threshold, almost 99.9 per cent of people do not have to pay a tax. Therefore, this tax law is mainly aimed at foreigners with higher incomes in China, as well as overseas Chinese, Hong Kong, Macao and Taiwan people. In September 1986, great changes have taken place in the personal income of domestic residents. The State Council promulgated the Interim Regulations on the the People's Republic of China of Personal Income Adjustment Tax and the Interim Regulations on the the People's Republic of China of Income Tax for Urban and Rural Individual Industrial and Commercial Households, which stipulate that the personal income of citizens of the country shall be uniformly levied. Personal income adjustment tax. At this point, the personal income tax in our country officially kicked off. Since then, China's individual income tax system has undergone several changes. The current individual income tax system is based on the individual income tax law implemented on January 1, 2019. Compared with the previous individual income tax law, it has several outstanding features:

1. Increase in "exemption"

The exemption will be increased to 5000 yuan per month and will be implemented first from October 1 of the year (2018) after the promulgation of the new individual income tax law.

2. Taxpayer standard adjustment

The standard for individual residents has changed from 365 days of residence in China to 183 days of residence, tightening the standard for individual residents and expanding the scope of taxation. Individual residents are required to pay taxes in China on their income from global sources.

3. Adjustment of collection method

Wages and salaries, remuneration for services, royalties and royalties will be included in the scope of [comprehensive income] taxation, and the collection and management mode of monthly or sub-item advance payment, annual summary calculation, more refund and less compensation will be implemented.

4. Perfect expense deduction

In addition to increasing the amount of exemption, six special additional deductions have been set up, such as children's education, continuing education, medical treatment for serious illness, interest on housing loans or housing rent, and support for the elderly.

5. Adjustment of tax rate structure

The seven-level excess progressive tax rate of 3%-45% has been used, the range of lower tax rates of 3%, 10% and 20% has been expanded, and the range of people applicable to lower tax rates has been expanded. The 25% tax rate range has been correspondingly narrowed, raising the tax burden of the middle-income group. The higher tax rate range of 30%, 35% and 45% will remain unchanged. Redistribution of income is achieved by adjusting the income brackets corresponding to different tax rates.

6. Consolidation and cancellation of tax items

merge income from contracted and leased operations and income from production and operation of individual industrial and commercial households into [operating income]],

The elimination of [other income] tax items reduces the arbitrariness of taxation and makes the tax law more rigorous.

2. Wealth Accumulation Should Be Compliant

The report of the 20th National Congress of the Communist Party of China pointed out that "improve the personal income tax system, standardize the order of income distribution, standardize the wealth accumulation mechanism, protect legal income, regulate excessive income, and ban illegal income". Regulating the wealth accumulation mechanism is reflected not only in the compliance of the source of wealth, but also in the compliance of the tax declaration and payment. Individual residents shall truthfully declare their income and pay taxes, and withholding agents shall truthfully report income and deduction information and withhold and pay taxes payable within the prescribed time limit. In this regard, the current Personal Income Tax Law has added anti-avoidance provisions, stipulating that "in any of the following circumstances, the tax authorities have the right to make tax adjustments in accordance with reasonable methods:

(I) the business transactions between an individual and its affiliates do not conform to the principle of independent transactions and reduce the amount of tax payable by himself or his affiliates without justifiable reasons;

Enterprises (II) under the control of individual residents, or under the joint control of individual residents and resident enterprises, set up in countries (regions) where the actual tax burden is obviously low, do not distribute or reduce the distribution of profits belonging to individual residents without reasonable business needs;

(III) individuals to obtain improper tax benefits by implementing other arrangements that do not have a reasonable business purpose.

If the tax authorities make tax adjustments in accordance with the provisions of the preceding paragraph and need to collect back taxes, they shall collect back taxes and add interest in accordance with the law."

The current Personal Income Tax Law stipulates:Income from wages and salaries obtained by individual residents; income from remuneration for services; income from remuneration for contributions; and income from royalties are within the scope of taxation of comprehensive income, and individual income tax shall be calculated on a consolidated basis according to the tax year. Income from business operations; income from interest, dividends and bonuses; income from property leases; income from property transfers; and incidental income are subject to separate personal income taxes in accordance with the law.In order to adopt a lower tax rate as much as possible, there are three common forms of tax evasion:

(I) hide actual income, for example, the show business often uses "yin and yang contracts" to reduce taxable income.

(II) change the nature of income, for example: the personal income into a sole proprietorship business income, the well-known anchor "Wei Ya" is mainly used in this way is ultimately identified as tax evasion.

(III) abuse of the approved levy, this way often first personal income into a sole proprietorship business income, and the sole proprietorship enterprise registered in the tax depression so as to use the approved levy to achieve the purpose of less tax.

The above three methods are not only commonly used by the so-called "high net worth people". In order to reduce labor costs, many units often use the above methods when paying actual wages to employees. However, with the launch of the fourth phase of the Golden Tax, when the tax system and banks With the opening of information channels, this way of tax evasion will be difficult to hide. At the same time, the current tax control system already has the ability to collect data in order to well implement the annual remittance, more refund and less compensation collection method, when the individual residents."Where the amount of tax paid in advance is greater than the amount of tax payable in the final settlement and a tax refund is applied"or"The annual comprehensive income exceeds 120000 yuan and the amount of tax required for final settlement exceeds 400 yuan"All need to handle the settlement.

A few days ago, personal income tax APP released a case: according to accurate analysis clues, Sichuan tax authorities found that Yao chonghong, an executive of a catering management co., ltd. in Chengdu, Sichuan province, failed to settle and pay the comprehensive income tax for 2021. After repeated reminders and supervision by the taxation department, Yao Chonghong still refused to apply for the declaration, and refused to sign or even tear up relevant legal documents, so the taxation department filed a case for inspection. After investigation, taxpayer Yao Chonghong failed to settle and pay the comprehensive income of personal income tax in 2021 within the statutory time limit, and paid less personal income tax. After the First Inspection Bureau of Chengdu Taxation Bureau served the "Tax Treatment Decision" and "Tax Administrative Punishment Decision" on it in accordance with the law, Yao Chonghong still refused to pay under various excuses. The tax department then transferred the case to the Executive Bureau of the People's Court of Jinjiang District, Chengdu for enforcement, freezing all bank accounts, WeChat accounts and Alipay accounts in Yao Chonghong, and issuing a consumption restriction order. After a joint interview between the tax department and the court, under the deterrence of the law, Yao Chonghong has now paid all taxes, late fees, fines and fines totaling 350000 yuan.

3. to enjoy dividends to compliance

Although tax payment is a "burden", the most important function of individual tax is not to raise funds for finance, but to regulate income and stimulate tax payers. Whether it is to reduce the income gap, or to encourage taxpayers to expand the consumption of childbirth, pension, personal development and so on, the personal income tax system is playing a role of "moistening things silently. To this end, the current individual tax system adds special additional deductions to the annual remittance, in summary, the formula for the remittance is as follows:

Tax refundable or payable =[(comprehensive income amount -60000 yuan-special deductions such as "three insurances and one fund"-special additional deductions such as children's education-other deductions determined according to law-eligible donations to public welfare and charity) × applicable tax rate-quick calculation deduction]-withheld tax amount.

There are several points worth noting in this formula:

(I) what is a quick deduction

The quick deduction is a data that simplifies the calculation of the taxable amount when the excess progressive tax rate is used. That is, under the condition of constant class distance and tax rate, the taxable amount of the full progressive tax rate is more than the taxable amount of the excess progressive tax rate. It is calculated as follows:

How to calculate the one-time bonus for the whole year of (II)

The salary and salary income of many residents consists of two parts-monthly income and one-time bonus for the whole year. According to the announcement of the Ministry of Finance and the State Administration of Taxation on the continuation of the implementation of the annual one-time bonus personal income tax policy (the announcement has been implemented until December 31, 2027), the tax amount of the annual one-time bonus can be calculated by two methods: the separate tax method converted on a monthly basis and the comprehensive income of the current year. However, the tax amount obtained by the two calculation methods is not consistent. Generally speaking, it is better to declare the salary of the current month higher than the one-time bonus of the whole year by using the separate tax law. Residents can also use the trial calculation function of the personal tax APP to try to declare the best.

Types and amounts of (III) deductible items

Special additional deductions include children's education, continuing education, serious illness medical care, housing loan interest or housing rent, support for the elderly, and care for infants and young children under 3 years of age. The special deduction items for 2023 are summarized in a chart as follows:

Of course, while enjoying the "bonus" of final settlement, we must declare truthfully and comply with the law. Recently, Personal Tax APP reported a case in Langfang City, Hebei Province. Employees of a sales company in Langfang City falsely filled in special additional deduction items for supporting the elderly and paid less personal income tax when handling the final settlement of comprehensive personal income tax in 2019 and 2020. When handling the final settlement of comprehensive personal income tax in 2021, falsely reporting tax-free income and special additional deductions for supporting the elderly, and paying less personal income tax. After the tax department repeatedly reminded and urged, refused to rectify. The tax department then recovered the tax, imposed a late fee and imposed a fine of 38300 yuan in accordance with the law. In this regard, the author of the non-compliance to fill in the legal consequences of combing, summarized as follows:

1, was suspended to enjoy special additional deduction.

For taxpayers who do not meet the requirements and refuse to correct or do not explain the situation, the tax authorities will suspend their enjoyment of special additional deductions. Taxpayers may continue to enjoy special additional deductions after correcting relevant information or explaining the situation as required.

2, is recorded in the personal tax credit file, and the implementation of joint punishment.

For the submission of false special additional deduction information, repeated enjoyment of special additional deduction, out of scope or standard enjoyment of special additional deduction, refusal to provide retained information, etc., the situation is serious, should be included in the relevant credit information system, and in accordance with the relevant provisions of the State to implement joint punishment.

3, be subject to administrative punishment or criminal responsibility

Taxpayers fail to file tax returns on time, fail to pay or underpay, fabricate false tax bases, and make false tax returns. The types of administrative penalties are defined, and criminal responsibility is investigated for serious circumstances.

Taxes go hand in hand with the benefits you get. Finally, I would like to remind readers once again that they are requested to handle the annual remittance in compliance with the regulations, carefully check the information filled in to ensure that it is true, accurate and complete, and retain the remittance-related information such as special additional deductions and tax preferential materials for 5 years from the end of the remittance period.

Lawyer Presentation

Lawyer Liu Ying

Lawyer Liu Ying is currently the director of the Enterprise Compliance Research Center of Beijing Huixiang Law Firm, ISO19600:2014, ISO37301:2021 Compliance Management System Auditor "Environmental, Social and Governance (ESG) Management System Requirements" Drafter, Senior Expert of China Business Federation International Compliance Management Expert Database, Third-party Review Expert of Beijing Public Welfare Legal Service Promotion Association, Mediator of Beijing Diversified Mediation Development Promotion Association, Legal Lecturer of Tsinghua University National Art Fund Talent Training Funding Project, member of the Beijing Intellectual Property Law Research Association, member of the Beijing Lawyers Association Technology and Big Data Legal Affairs Professional Committee, his practice mainly focuses on corporate risk and compliance management, corporate governance and equity investment and financing, construction engineering disputes, trademark rights and copyright protection, etc. Legal services, has served as a legal consultant for many enterprises and institutions, and is good at applying legal risk prevention and control to all aspects of corporate compliance management and project operation based on industry characteristics, "Good law does not sue" is Liu Ying lawyer's consistent practice philosophy.

Liu Siyu

Member of the Corporate Compliance Center of Beijing Huixiang Law Firm, Bachelor of Laws from Zhongshan University, Chinese Certified Public Accountant (non-practicing),ISO37301:2021 Compliance Management System Auditor, once worked in the judicial department and United Front Work Department of a municipality directly under the Central Government; during his tenure in the government He has handled more than 100 government administrative reconsideration cases and administrative litigation cases, covering many fields such as public security, housing construction, information disclosure, and housing expropriation on state-owned land. The main areas are administrative case disputes, commercial dispute resolution, corporate risk and compliance management, corporate dispute resolution and other legal services.