Where a tax resident obtain income from wages and salaries for the first time in a year, his withholding agent shall deduct accumulated expenses (5000 Yuan per month) calculated from January when withholding and prepaying IIT for him.

For instance, a University graduate Xiao Li began to work in a company from July 2020. When calculating his IIT payable, the deductible expenses shall be 35,000 Yuan (5000 Yuan/month ? months).

The individual residents stated in the Announcement who obtain income from wages and salaries for the first time in the year refer to those who have not obtained any wages or salaries or continuous labor income from the first month of the year to the month of employment. Those who have obtained wages or salaries or continuous labor income before joining in the new company are not included. If the taxpayer only obtained labor income, contribution fee and royalty, they are still eligible for the policy in the Announcement.

For example, a taxpayer Xiao Wang has no work from January to August 2020, thus he has not obtained any income from wages or salaries. The only income of 8,000 Yuan is sourced from labor service as one-off income and has been taxed at 20%. He finally finds a new job in September and begins to obtain income from wages and salaries. Then cumulated expenses of 45,000 Yuan (5000 Yuan/month ? months) shall be deducted from the chargeable income when calculating his IIT for September.

Where a student receiving full-time academic education obtains labor service income during internship, his IIT withholding agent shall calculate IIT using the cumulative method, withhold and prepay his IIT in accordance with relevant law.

Based on relevant regulations of IIT, the formula to calculate IIT using cumulative method is as below:

Amount of tax to be withheld in the current period = (accumulated income ?accumulated expenses)?rate ?quick deduction ?accumulated exemption ?accumulated tax withheld and paid

The accumulated expenses deduction in the formula shall be calculated as multiplying 5000 Yuan by the number of internship months from the beginning of the internship in the organization to current month.

For example, a student Xiao Zhang conducted internship and obtained labor service income of 3,000 Yuan in July. The withholding agent may use cumulative method when withholding his IIT. If cumulative method is adopted, Xiao Zhang will not need to pay IIT after deducting the expense of 5,000 Yuan, thus the IIT has been decreased by  440 Yuan compared with the calculation method before the adjustment. If Xiao Zhang does not obtain other comprehensive income during the year, there is no need to conduct IIT annual settlement.

Taxpayers may determine if they are qualified for the criteria in the Announcement according to their own conditions. Those qualified should declare to their withholding agent and provide true and relevant supporting documents or letter of commitment. The new recruited graduates may present their graduation certificate or dispatch certificate as supporting documents; interns who obtain labor income and adopt cumulative withholding method may present student card as the supporting document; other taxpayers who obtain wages and salaries for the first time during the year may present a letter of commitment as the supporting document.

After receiving relevant supporting documents or letter of commitment, the withholding agent may withhold and prepay IIT using the improved and adjusted method of withholding and prepaying IIT.

In the meantime, taxpayers are responsible for the truthfulness, accuracy and completeness of the supporting documents and letter of commitment. The supporting documents and letter of commitment, whether original or duplicates, shall be kept for checking by the taxpayers and the withholding agents.

The Announcement shall be implemented from 1 July 2020. Those taxpayers began to work or conduct intern before 1 July 2020 may apply for tax refund when conduct tax settlement for comprehensive income in the following year if they had overpaid IIT.