CIRCULAR ON SOME QUESTIONS CONCERNING THE LEVY OF INDIVIDUAL IN-COME TAX ON INCOME EARNED FROM ABROAD

CIRCULAR ON SOME QUESTIONS CONCERNING THE LEVY OF INDIVIDUAL IN-COME TAX ON INCOME EARNED FROM ABROAD (State Administration of Taxation: 8 March 1994 Coded Guo Shui Fa[1994] No. 044) Whole Doc.

To the tax bureaus of various provinces, autonomous regions and municipalities, to the tax bureaus of various cities with independent planning, and to various sub-bureaus of the Offshore Oil Tax Administration: In order to safeguard the state's taxation rights and interests, and in accordance with the related stipulations of the Law of the People's Republic of China on Individual Income Tax and the Regulations for Its Implementation, the Circular on Some Questions Concerning the Levy of Individual Income Tax on Income Earned From Abroad is hereby given as follows: I. Question concerning the declaration time limit for tax payment For the taxable income earned from outside China and the individual income tax is calculated and paid on the tax-paying year abroad, the tax payer shall, within 30 days after the end of the tax-paying year and the clearing of taxes in the country where the income is earned, declare to China's tax authorities and pay individual income tax; those who settle the account of tax when income is earned from abroad, or the individual income tax is exempt abroad in accordance with the stipulations of the tax law of the country where the income is earned shall, with in 30 days from January 1 of the following year, declare to China's tax authorities and pay individual income tax. A tax payer who has income earned from both inside and outside China shall respectively declare, calculate and pay tax.

II. Question concerning withholding taxes abroad For a tax payer who holds a post in or is hired by a Chinese company, or enterprise, another economic organization or unit which sends him to an overseas organization, the overseas organization where he holds a post or is hired shall declare tax payment together and withhold the tax.

III. The question concerning declaration method for tax payment A tax payer who is unable to declare tax payment at the competent tax authorities within the specified declaration time limit shall entrust someone with declaration on tax payment or mail the declaration on tax payment. For a mailed declaration on tax payment, the local postmark day on which the mail is sent out is taken as the actual day of declaration.

IV. Examples for the deduction of overseas income tax A tax payer who earned salary income of 60000 yuan (the same below) in A country from January to December 1994, and income from royalties of 7000 yuan; at the same time he earned 1000 yuan income from interest in B country. In accordance with the stipulations of the tax laws of A country and B country, the tax payer has paid 1150 yuan and 250 yuan in individual income tax, the method for calculating deduction follows: (1) Deduction of tax paid for the income earned in A country The amount of payable tax calculated in accordance with the stipulations of China's Tax Laws on the income earned from wages and salaries: 60000 quick calculation {(-- - 4000) X tax rate - deducted amount } X 12 (months) 12 = (1000 X 10% - 25) X 12 = 900 yuan 2. The payable amount of tax calculated in accordance with the stipulations of China's Tax Laws on the income earned from royalties: 7000 X (1 - 20%) X 20% (tax rate) = 1120 yuan 3. Deducted quota: 900 + 1120 = 2020 yuan 4. The tax payer pays 1150 yuan of individual income tax on the income earned in A country, which is lower than the deducted quota, therefore, it can be fully deducted and the tax payer shall repay 870 yuan of tax in China (2020 - 1150).

(2) Deduction of tax paid for the income earned from B country The payable amount of tax calculated according to the stipulations of China's Tax Laws on the income gained from interest in B country, that is the deduction quota: 1000 x 20% (tax rate) = 200 yuan The actual tax paid by the tax payer in B country exceeds the deduction quota, therefore, only 200 yuan can be deducted from within the quota, and no more back duty is required.

(3) Deduction result of tax payment for the income earned from A and B countries In accordance with the above-mentioned calculation result, the tax payer shall repay 870 yuan of individual income tax in China on the income he earns from abroad in the current year, the 50 yuan which has not been deducted from the tax paid in B country can be re-deducted from the balance of the deduction quota of the tax levied on the income gained by the tax payer from the B country within the subsequent five years.

V. This Circular goes into effect on January 1, 1994.

A country from January to December 1994, and income from royalties of 7000 yuan; at the same time he earned 1000 yuan income from interest in B country. In accordance with the stipulations of the tax laws of A country and B country, the tax payer has paid 1150 yuan and 250 yuan in individual income tax, the method for calculating deduction follows: (1) Deduction of tax paid for the income earned in A country The amount of payable tax calculated in accordance with the stipulations of China's Tax Laws on the income earned from wages and salaries: 60000 quick calculation {(-- - 4000) X tax rate - deducted amount } X 12 (months) 12 = (1000 X 10% - 25) X 12 = 900 yuan 2. The payable amount of tax calculated in accordance with the stipulations of China's Tax Laws on the income earned from royalties: 7000 X (1 - 20%) X 20% (tax rate) = 1120 yuan 3. Deducted quota: 900 + 1120 = 2020 yuan 4. The tax payer pays 1150 yuan of individual income tax on the income earned in A country, which is lower than the deducted quota, therefore, it can be fully deducted and the tax payer shall repay 870 yuan of tax in China (2020 - 1150).

(2) Deduction of tax paid for the income earned from B country The payable amount of tax calculated according to the stipulations of China's Tax Laws on the income gained from interest in B country, that is the deduction quota: 1000 x 20% (tax rate) = 200 yuan The actual tax paid by the tax payer in B country exceeds the deduction quota, therefore, only 200 yuan can be deducted from within the quota, and no more back duty is required.

(3) Deduction result of tax payment for the income earned from A and B countries In accordance with the above-mentioned calculation result, the tax payer shall repay 870 yuan of individual income tax in China on the income he earns from abroad in the current year, the 50 yuan which has not been deducted from the tax paid in B country can be re-deducted from the balance of the deduction quota of the tax levied on the income gained by the tax payer from the B country within the subsequent five years.

V. This Circular goes into effect on January 1, 1994.