Dongguan Municipal Local Taxation Bureau Clarifies Terms in IIT Declaration

The Dongguan Municipal Local Taxation Bureau issued a notice explaining certain terms in the individual income tax (IIT) declaration process.  These terms are: (i) “The income period”; (ii) “The period to which the income belongs”; and (iii) “The period to which the tax payment belongs”.  These terms are explained below.

• “The income period”: refers to the time that the withholding agent paid the taxable   income to the taxpayer, i.e., the month in which the income was distributed.
• “The period to which the income belongs (start)” and “The period to which the income belongs (end)”: refers to the period to which the taxpayer’s income belongs. For income from wages and salaries, manufacturing and operation, and labor services, it can be generally interpreted as the period of time during which the person inputs labor in exchange for the income; for author’s remuneration, it refers to the date that the work is published in the form of books or periodicals; for income from royalty and property leasing, it refers to the period of time during which such usage right is provided in exchange for such income; for random income, it refers to the date the taxpayer receives the relevant award, or wins the prize or lottery; with regard to interests, dividends and bonuses, it refers to the period of time the equity or debt is held for the purpose of calculating interest, or the period of time to which the post-tax profit upon which the shareholders conduct distribution belongs.)
• “The period to which the tax payment belongs”: refers to the time the taxpayer receives taxable income and thus incurs tax payment obligation. The taxpayer incurs tax payment obligation at the same time that the withholding agent pays the taxable income, as such, from the time perspective, “The income period” and “The period to which the tax payment belongs” refer to the same time period.

Example:

Xinye Real Estate Company (“Xinye”) issued the salary payment for July in August 2011, and declared the withheld IIT in September. As such, in the September IIT Detailed Declaration Form filled out by Xinye, “The income period” should be August 2011, while “The period to which the income belongs (start)” is July 1, 2011, while “The period to which the income belongs (end)” is July 31, 2011.  In addition, the system will automatically define “The period to which the tax payment belongs” as August 1-31, 2011.

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