Business Resources

China Statutory Update – IIT withholding calculation method improvement for new joiners / Interns

Dear Customers.

At the end of Jul’20 , China State Administration of Taxation made the No.13, 2020 announcement regarding IIT withholding calculation improvement for 1) new joiners who obtain the first income salary in the middle of year and 2) college students during the internship. Effective from 1st Jul 2020, below are the changes for those two types of employees.

1) New joiners who obtain income salary for the first time within one tax year (fresh graduate/ first employment for current year)

For new joiners (tax residents) who obtain income salary for the first time within one tax year and their hire date is no earlier than 1st Jul 2020, the standard deduction could be changed to 5000 * the number of months from January to current payroll month when calculating personal withholding tax.

If new joiners would like to enjoy the new policy, they shall provide relevant supporting documents for the employer, to prove it is their first time to obtain income salary during the current year and make sure all documents are valid and accurate.  For fresh graduate, they shall prove there is no continuous labor remuneration for the year before.
Employer shall keep the proof for further reference and proceed new tax calculation for employees.

If it is not the case, the standard deduction remains unchanged. It is 5000 * the number of months from hire month to current payroll month.

2) College students during the internship.

For college students (full-time education) during the internship who obtain labor remuneration, tax for temporary staff (intern) should be changed to cumulative tax calculation method.

The new formula would be as below:

Tax for temporary staff (intern) = (Cumulative income – Cumulative standard deduction ) * yearly tax rate – yearly quick deduction – paid tax for previous months

* Cumulative standard deduction = 5000 * the number of months from internship start month to current payroll month.

If Intern would like to enjoy the new policy, they shall provide relevant student ID card / other documents for the employer and make sure all documents are valid and accurate.
Employer shall keep the proof for further reference and proceed new tax calculation for Interns

If it is not the case, tax for temporary staff calculation remains unchanged.

Reference link: link 1, link 2