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Tax refund in China

It is always a pleasure to pay less taxes. In 2019 new tax refunds came into operation in China:

1. For children education – up to 12.000 yuan per year, every parent may get up to 50% of this amount.
2. For professional and post-graduate education – up to 4.800 yuan per year.
3. For severe illness suffered and the cost of its treatment – up to 15.000 yuan per year
4. For mortgage payments – up to 12.000 yuan per year.
5. For rental housing – up to 14.400 yuan per year for the first level cities (Beijing, Shanghai, Guangzhou, Shenzhen, regional centers), up to 12.000 yuan per year for cities that have population up to 10 million people, and 9.600 yuan for all other cities.
6. For people older than 60 and are under care of other family members- up to 24.000 yuan per year.

First of all, let’s get the idea of what is a tax refund. Tax refund does not mean lowering the total amount of money you should pay as taxes. Tax refund means lowering the sum that is used for calculating the total amount of taxes.

For example, you get 10,000 yuan, from that amount of money you must pay personal income tax at a rate of 30%. It means, that without using tax refund, the total amount of personal income tax will be equal 3000 yuan.

Or you get 10,000 yuan a month as your salary, of which you must pay personal income tax at a rate of 30%. But you have a mortgage refund equal to 12,000 yuan per year or 1,000 yuan per month. Using this refund, the personal income tax is calculated by the formula:  “(salary-refund amount)*tax rate” . That is (10.000-1.000) * 0.3. As a result, together with the refund, you will pay 2.700 yuan of personal income tax instead of paying 3000 yuan.

Certainly, the real formula of counting tax refunds is much more complicated, for those who are interested – we have an article about payroll calculation in China. Anyway, the amount of taxes decreases significantly after using refunds. Let’s look closer at a real example.

A person receives a salary of 11,815 yuan per month. This is 10.250 yuan after paying taxes. Total personal income tax is 317 yuan per month. After using a possibility to get a deduction fee for renting an apartment, the person gets 10,500 yuan per month, and the personal income tax decreases to 127 yuan.

Like in the example mentioned above, the most satisfying moment of the calculations is when they reach the boundaries of personal income tax rates and instantly reduce the rates by times. In the example above, prior to refund, the resulting amount was 10% of personal income tax (as you might know, the PRC has a progressive tax rate), and after using the refund it reached 3% .

It is very easy to formalize. To do so, you will need your passport, documents numbers confirming your expenses (in this case- an apartment rental agreement number)

After downloading an application called ”个人所得税” from the Appstore, you will need to visit your district Tax Inspectorate and receive a registration code. Unfortunately, registration and verification using FaceID is available only for PRC citizens (as in many other applications aswell).

Registration code (“注册码”) can be obtained from any tax officer, this code was received in a terminal near the reception desk

After completing registration in the application, you choose a refund you want to receive and fill in the information concerning this refund. In the picture – it was necessary to fill in the information about the address of the apartment being rented, the lease term, the full name and ID number of the lessor.

Filling in the forms took less than 5 minutes.

After you’re done with filling in the information, you will need to choose a form of the declaration – “自行” or “扣缴义务人申报”. This step is very important. The first one you will have to fill in by yourself. Mostly, foreigners in China don’t have an income except salary, from which they have to pay personal income tax. The employer alone pays this tax, so your choice is likely to be the second type of the declaration.

Done. In a few days (up to 10 days) you make a request for your accountants to check the refund status in the system. If you see a note saying “报送 成功” like you can see in the picture (red circle), then your tax refund is a success, the tax Administration has no questions for you and you can open a champagne. If the refund took action before you could apply for it (like in the case above, the application for a refund was made in February, after receiving salary for January), then next month you will receive the overpaid sum.


Voila! It’s a success!

That’s pretty much it. If, say, the lease agreement is over and you have signed a new one, then you simply press the “修改” button in the same application and change the agreement data for the updated one.

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