The Ministry of Finance ("MOF") issued on August 28, 2023 the Announcement on Continuing the Implementation of the Individual Income Tax Policy for Annual Lump-sum Bonuses, saying that the current policy will remain in force until December 31, 2027 (Announcement n.30 of 2023).
According to the Announcement, if the annual lump-sum bonus obtained by a resident meets the provisions of Guo Shui Fa No.9 (2005) Document, it will not be included in the resident's current-year comprehensive income. Payable taxes will be separately calculated by multiplying the amount obtained by dividing the annual lump-sum bonus by 12 months with the applicable monthly tax rate after excluding the quick deduction amount as specified in the comprehensive income tax rates table attached to the Announcement. The specific calculation formula is as follows:
Taxable amount = Annual lump-sum bonus income × applicable tax rate - quick deduction
Residents who receive annual lump-sum bonuses may also choose to merge the bonuses into their annual comprehensive incomes to calculate their payable taxes for the year concerned.