The tax calculation method can still be "either", and the year-end bonus personal income tax preferential policy will be extended for another four years

Recently, the Ministry of Finance and the State Administration of Taxation issued a notice on continuing the implementation of the annual one-time bonus personal income tax policy, which extends the policy of not including the annual one-time bonus in comprehensive income and implementing separate monthly taxation until the end of 2027.

As mentioned in the announcement, individual residents who receive a one-time bonus for the whole year, in accordance with the provisions of the Notice of the State Administration of Taxation on Adjusting the Method of Calculating and Levying Personal Income Tax on Personal Income Tax Obtained from Annual one-time Bonuses, are not included in the comprehensive income of the current year. Instead, the amount obtained by dividing the annual one-time bonus income by 12 months is separately calculated and taxed. Individual residents can receive a one-time bonus for the whole year, or they can choose to include it in the comprehensive income calculation for the current year for tax payment. The announcement will be executed until December 31, 2027.

This means that the year-end bonus personal income tax preferential policy will be extended for another 4 years, further reducing the burden on taxpayers.

Starting from 2019, China has implemented a new round of individual income tax reform, introducing a comprehensive income tax system. According to the notice issued by the Ministry of Finance and the State Administration of Taxation at that time, the year-end bonus can be taxed separately during a transitional period of three years. At the end of 2021, the executive meeting of the State Council decided to extend the separate tax incentives for another two years until the end of 2023.

What is the difference between separate taxation and combined taxation? The tax department has previously provided an answer.

For example, Lao Li's annual salary is 200000 yuan, and his year-end bonus is 24000 yuan. Assuming that he can enjoy three insurances and one fund, and support the elderly, a total of 44000 yuan can be deducted. How should he pay taxes during the annual settlement?

There are two options. One is to combine the 24000 yuan bonus and 200000 yuan salary for tax calculation. After deducting 60000 yuan from expenses and 44000 yuan, the taxable income is 120000 yuan. According to the annual tax rate table of comprehensive income, the taxable income is 120000 x 10% -2520=9480 yuan; The second is to separately calculate the tax on the 24000 yuan bonus. At the end of the year, the bonus should be taxed at 720 yuan. After deducting 60000 yuan of expenses and 44000 yuan from the 200000 yuan salary, the tax payable is 96000 x 10% -2520=7080 yuan, totaling 7800 yuan. Under the two methods, the difference in tax amount is 1680 yuan, and it is more cost-effective for Lao Li to choose to calculate taxes separately.

For example, Xiaozhang's annual salary is 120000 yuan, and the year-end bonus is 60000 yuan. Assuming that he can enjoy deductions such as three insurances and one fund, supporting the elderly, etc., totaling 40000 yuan. In the annual settlement, if Xiaozhang chooses to calculate taxes separately for the annual bonus, the year-end bonus should be taxed at 60000 x 10% -210=5790 yuan. After deducting expenses and 40000 yuan from the 120000 yuan salary, the tax should be 20000 x 3%=600 yuan, totaling 6390 yuan; If Xiaozhang combines the year-end bonus with his daily salary for tax calculation, after deducting 60000 yuan from expenses and 40000 yuan, he should pay a tax of 80000 × 10% -2520=5480 yuan. Therefore, Xiaozhang will include the year-end bonus in the comprehensive income tax, and pay less tax.

Due to the diverse personal situations, it is recommended that you log in to the mobile personal income tax app and choose between consolidated or separate tax calculation methods when calculating your annual income tax. The personal income tax app will automatically calculate the results and compare which one is more cost-effective.

The two departments also recently issued a notice on the continuation of policies related to the comprehensive settlement and payment of personal income tax and a notice on the continuation of policies related to the subsidy of personal income tax for foreign individuals.

It is mentioned that in order to further reduce the burden on taxpayers, for the comprehensive income obtained by individual residents from January 1, 2024 to December 31, 2027, if the annual comprehensive income does not exceed 120000 yuan and requires settlement and payment of supplementary tax, or if the annual settlement and payment of supplementary tax does not exceed 400 yuan, individual residents are exempt from handling the settlement and payment of personal income tax.

Foreign individuals who meet the personal conditions of residents can choose to enjoy special additional deductions for personal income tax, or choose to enjoy tax exemption policies for housing subsidies, language training fees, children's education fees, and other subsidies in accordance with the "Notice of the Ministry of Finance and the State Administration of Taxation on Several Policy Issues Concerning Personal Income Tax", "Notice of the State Administration of Taxation on the Implementation of Subsidies and Exemption of Personal Income Tax for Foreign Individuals Obtaining Housing and Other Subsidies in Hong Kong and Macao", but cannot enjoy them simultaneously. Once selected, foreign individuals are not allowed to change within one tax year. The announcement will be executed until December 31, 2027.