Bear in mind the two new tax deductions for the 2022 tax year!
In the 2022 annual personal income tax comprehensive income declaration, two new pre-tax deduction categories were added: "infant care under three years old" and "personal pension." The State Council has decided to establish a special additional deduction for individual income tax for the care of infants and young children under the age of three in order to implement the Decision of the Central Committee of the Communist Party of China and the State Council on Optimizing Fertility Policies and Promoting Long-term Balanced Population Development.
From January 1st, 2022, taxpayers' expenses related to the care of children under the age of 3 will be deducted by a flat mount of RMB 1,000 per month per infant and child before computing the payment of individual income tax. The policy also explains how the unique additional deduction amount is distributed among the parents.
The Announcement of the Ministry of Finance and the State Administration of Taxation on the Personal Income Tax Policy Relating to Personal Pensions (Ministry of Finance and State Administration of Taxation Announcement No. 34 of 2022) provides deductions related to personal pensions to be implemented in major cities beginning January 1st, 2022.
Individual contributions to the individual pension fund account must be deducted from total income or company income at the limit of RMB 12,000 per year. Individual pensions are not included in comprehensive income, and individual income tax is computed and paid at a separate rate of 3%, with the tax paid included in the item of "wages and salary income." When an individual contribution is eligible for a pre-tax deduction, the deduction voucher provided by the personal pension information management service platform serves as the tax receipt. Remember to report the information on time after purchasing personal pension products!
Income Tax Policies for Small and Micro Enterprises and Self-Employed Entrepreneurs
On March 26th, 2023, the Ministry of Finance and the State Taxation Administration published an Announcement on Preferential Income Tax Policies for Small and Micro Enterprises and Individual Industrial and Commercial Households (No. 6 of 2023) to further support their development. Such polices state that:
- For the part of small low-profit enterprises’ annual taxable income not exceeding RMB1,000,000, the enterprise income tax shall be further reduced by 25% of the taxable income and subject to Corporate Income Tax at a rate of 20%.
- For the part of self-employed entrepreneurs’ annual taxable income not exceeding RMB1,000,000, the individual income tax shall be further reduced by half.
The annual taxable income shall be temporarily judged according to the situation as of the end of the current period of the declaration and shall be calculated on an annual basis at the time of annual settlement and payment.
This announcement will be in force until December 31st, 2024.
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