Based on the Measures’ requirements and local practices, we have summarised the following recommended actions from both the taxpayer and employer perspectives, in order to help with planning ahead and executing the PRC IIT reconciliation process effectively, thereby fostering compliance with prevailing PRC tax rules.
Taxpayer
Information confirmation and verification
- Confirm the validity of personal basic information (phone number, bank account, etc.). A valid domestic bank account is required for tax refunds in China. For departing personnel, if a domestic bank account will no longer be accessible after one’s departure, PRC IIT reconciliation should be completed before leaving China.
- Verify the completeness and accuracy of personal income, deductions, and tax withholding information to determine if PRC IIT reconciliation is necessary. Please note:
- Consolidate equity-based incentives from different entities for tax calculation and reporting purposes.
- Combine taxable overseas income with domestic income for tax calculation and reporting purposes. If PRC IIT reconciliation cannot be completed by the due date, taxpayers may file an extension at the competent tax authority and pre-pay the tax before 30 June..
Agent authorisation
- If the taxpayer authorises his/her employer or a professional firm to handle PRC IIT reconciliation, such authorisation must be confirmed in writing or electronically.
Responsibilities and rights
- Taxpayers should retain relevant information and documents for at least five years from the due date of PRC IIT reconciliation.
- Taxpayers should timely submit supplementary documents (where necessary) and complete tax payment (refund application) in order to avoid any potential impact to personal tax records.
Enterprise/Employer
Employee education and support
- Where necessary, conduct employee education sessions with regards to PRC IIT reconciliation and help employees to fulfill PRC IIT reconciliation obligations in due course.
- Collate outbound expatriate employees’ information and remind them, and/or provide assistance, to report overseas income and remit the tax in due course.
- Remind the enterprise managers (e.g., legal representative, etc.) of their PRC IIT reconciliation obligations and the potential impact to the company’s tax credit rating assessment for any failure to fulfill the obligations.
Fulfilling agency obligations
- If the taxpayer authorises his/her employer to handle his/her PRC IIT reconciliation, the employer should:
- complete PRC IIT reconciliation and tax payment, or educate and support the taxpayer to complete PRC IIT reconciliation and tax payment (refund);
- confirm with the taxpayer if agent authorisation has occurred in writing or electronically;
- retain relevant information and documents for five years.
- Failure to fulfill agency obligations or assume a false identity will attract penalties and affect the company’s tax credit assessment.
KPMG in China is monitoring developments on this matter closely and will endeavour to provide updates as and when any important developments occur.
Any questions or concerns about the change in the rules and procedures regarding PRC IIT reconciliation and the Measures should be directed to your usual qualified tax professional or a member of the GMS team with KPMG in China (see the Contacts section).
