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What is remuneration for personal services, and how to distinguish remuneration for personal services and salaries and wages income?
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According to the “Decision of the State Council on Amending the Implementation Regulations of the Individual Income Tax Law of the People’s Republic of China” (PRC President’s Order, No. 600), Article 8 Paragraph 4 stipulates that remuneration for personal services refers to gross income derived by individuals from independent services such as design, decoration, installation, graphics, laboratory tests, testing, medical treatment, law, accounting, consultation, lectures, news, broadcasting, translation, review, calligraphy and painting, sculpture, film and television, recording, video, performance, advertising, exhibition, technical services, introduction services, brokerage services, agency services and other labour services."
Wages and salaries income are derived by non-independent individual providing labour activities, that is, remuneration for being employed in units, organizations, schools, troops, enterprises, institutions, and other organizations. Remuneration for personal services is derived by independent individuals from engaging in various skills and providing various services. The main difference between these two is that the former has employment relationship, while the latter does not.
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The taxable amount of remuneration for personal services and the applicable tax rate?
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The taxable income of resident individuals, according to the “Decision on Amending the Individual Income Tax Law of the People's Republic of China” ((PRC President’s Order, No. 48), Item 4 of Article 6 Paragraph 1 stipulates that for the remuneration for personal services, author's remuneration, royalties, and income from property leases, if the income amount does not exceed 4,000 yuan each time, 800 yuan will be deducted, if the income amount exceed 4,000 yuan or more, 20% of the fee will be deducted, and the balance will be the taxable income. The withholding and prepayment of individual income tax shall be calculated by applying the “three-level tax rate table for withholding and prepayment of income from resident individual labour services”.
The taxable income of non-resident individuals, according to Article 2 of the “Announcement of the State Administration of Taxation on the Full Implementation of the New Individual Income Tax Law on Several Issues concerning the Connection of Collection and Administration” (State Administration of Taxation Announcement 2018 No. 56) issued on December 19, 2018, for non-resident individuals’ remuneration for personal services, the balance of each income minus 20% of the expenses is the taxable income amount, and the tax payable is calculated by applying “ the 7-level monthly comprehensive income tax rate table”.
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How individual income tax levied for resident individuals’ different items of remuneration for personal services?
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According to the Items 1 of Article 21 Paragraph 1 of the “Notice of the State Administration of Taxation on Printing and Distributing the “Provisions on Several Issues Concerning the Collection of Individual Income Tax" (Guo Shui Fa [1994] No. 89), the “same item” refers to a single item in the specific labour items listed in the remuneration for personal services. If the resident individual has different remuneration for personal services, the expenses shall be deducted separately, and the individual income tax shall be calculated and paid.
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How to withhold and prepay individual income tax for students who are receiving full-time education and obtain remuneration for personal services for internship?
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The “Announcement of Adjusting Individual Income Tax Withhold and Prepayment for Partial Taxpayers” (State Administration of Taxation Announcement 2020 No. 13) stipulates that students who are receiving full-time education and have remuneration for personal services due to internships from July 1, 2020, withholding agents may withhold and prepay individual income tax in cumulative withholding method in accordance with the “Announcement of the State Administration of Taxation on Issuing the Administrative Measures for Individual Income Tax Withholding Declaration (Trial)” (2018 No. 61) .
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Do taxpayers need to conduct annual declaration of remuneration for personal services?
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According to the tax law, comprehensive income includes four items: wages and salaries income, remuneration for personal services, income from author's remuneration, and royalties. The annual declaration of comprehensive income includes the four items of income. Therefore, resident individuals should conduct an annual declaration on remuneration for personal services after the end of the year. Non-resident individuals do not need to conduct annual declaration.
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