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Q：
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What are ‘three types of collecting and withholding tax’?
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The ‘three types of collecting and withholding tax’ refer to taxes related to ‘withholding and remitting’, ‘collecting and remitting’ and ‘commissioned collecting’. The commonly known ‘three types of collecting and withholding tax’ include individual income tax, withholding enterprise income tax and value-added tax when remitting funds to abroad, vehicle purchase tax, motor vehicle and vessel tax, stamp duty for securities trading, etc.
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What is the handling charge refund for ‘three types of collecting and withholding tax’? Who are qualified to apply for the refund?
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In order to stimulate and reward the withholding agents to withhold, collect and remit taxes in accordance with regulations and laws, tax authority will refund a certain rate of the taxes collected and withheld to the withholding agents as handling charge or commissions. The aforesaid agents could be enterprises or individuals who are performing the obligation of withholding, collecting and remitting.
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What is the rate and the upper limit of the handling charge?
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The rates and upper limits of the handling charge are different based on the tax categories, for example, for the withholding taxes ruled by the law and administrative regulations, tax authority shall refund no more than 2% of total tax at a ceiling amount of RMB700,000 to one single agent and the amount exceeding 700,000 shall not be refunded. For collecting and remitting the vehicle purchasing tax, tax authority shall refund no more than 3% of total tax paid. For details, you may refer to Notice on Further Strengthening Administration of Commissions of Withholding, Collecting and Remitting Taxes’ (Cai Hang [2019] No. 11).
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When should enterprises apply for the handling charge refund of ‘three types of collecting and withholding tax’?
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Generally speaking, enterprises may apply for the handling charge of ‘three types of collecting and withholding tax’ paid in preceding year on or before 30 March every year. The application starting date shall be notified by competent tax authority. Due to the impact of the COVID-19 epidemic in 2020, the application deadline is postponed to 30 May. Furthermore, in 2020, enterprises may apply for the refund of handling charge for tax withheld in 2017 and 2018 if no refund application made before.
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How to apply for handling charge refund of ‘three types of collecting and withholding tax’?
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With the development of information technology, the application could be made visa online system of the tax authorities. In Beijing, take year 2020 as an example, the handling charge of individual income tax for year 2019 is applied through natural individual electronic tax bureau, the handling charge of other‘three types of collecting and withholding tax’ can be also applied via Beijing electronic tax bureau.
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Does enterprise need to pay tax for the handling charge refund?
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Most of the local tax administrations, including Beijing tax administration, categorize the refund of handling charge of ‘three types of collecting and withholding tax’ as VAT taxable service income. After receiving the refund, the enterprise shall recognize it as other income and make the provision for VAT at 6% or 3%. Besides, if the enterprise pays all or part of the refund to the employee who is in charge of relevant taxes filing, this part of commission is exempt from individual income tax.
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