According to relevant laws and regulations, income tax paid by residents abroad can be credited. So how do we calculate the foreign income tax credit limit for residents’ personal overseas income? Usually we can calculate it in three steps. Let’s follow the Deep Space Network to learn more!

How to calculate the credit limit for overseas income obtained by residents?

It is divided into three steps:

Calculate the tax payable for all domestic and overseas income obtained by resident individuals in a year according to the tax calculation methods corresponding to comprehensive income, business income, and other categories of income. Forehead.

Step 2

Calculate the credit limit for a certain type of income from a country (region) overseas. For example, based on the type and amount of overseas income from country A, the credit limit The limit calculation method is as follows:

(1) Calculate comprehensive income

For the credit limit for comprehensive income from country A, the credit limit can be based on the resident individual’s comprehensive income from country A. Calculated as a proportion of its total domestic and overseas comprehensive income. When calculating the tax payable on comprehensive income in accordance with the formula in Item (1) of Article 3 of the "Announcement on Personal Income Tax Policies Related to Overseas Income" (Announcement No. 3 of the Ministry of Finance and the State Administration of Taxation, hereinafter referred to as "Announcement No. 3"), for taxpayers who have obtained full income tax, For income such as annual one-time bonuses and equity incentives that are separately taxed according to law, the tax payable on this income can be calculated separately first, plus the tax payable calculated according to law on the comprehensive income that needs to be combined for tax calculation. The tax payable on domestic and overseas comprehensive income is obtained.

(2) Calculate business income

For business income, first calculate the taxable income of resident individuals from business income derived from country A in accordance with Article 2 of Announcement No. 3 , and then calculate the credit limit for the business income from country A based on the proportion of the taxable income of the business income to the total domestic and overseas business income.

(3) Calculation of other categories of income

The calculation of interest, dividends, bonus income, income from property leasing, income from property transfer and incidental income and other categories of income should be calculated according to the source of country A. The tax payable calculated separately for each other category of income is summed up as the credit limit for other categories of income from country A.

The third step

Calculating the credit limit for income from a country (region) is actually the credit limit for each item of income from a foreign country (region). and.

Related processing of foreign tax credits

Foreign tax credits can be direct credits or indirect credits.

Direct credit means that the amount of income tax paid overseas by an enterprise as a taxpayer directly on its overseas income is deducted from the tax payable in my country.

Indirect credit applies to dividends, dividends and other equity investment income obtained by resident enterprises from their overseas subsidiaries that comply with the provisions of Articles 5 and 6 of the "Notice". Specifically, it refers to the part of the foreign income tax paid by overseas enterprises on profits before distribution of dividends that is indirectly borne by Chinese resident enterprises on the income of the nature of dividends distributed, which shall be deducted from the tax payable in my country.

Introduction to domestic and overseas corporate income tax and tax credits

How to make accounting entries for corporate income tax reduction and exemption?

1. When making provision:

Credit: Taxes payable - corporate income tax.

2. When withholding:

Debit: taxes payable - corporate income tax

Credit: bank deposit

For individuals When reporting overseas income, is it applicable to "pay-per-time declaration" or "settlement and settlement" reporting?

Answer: For an individual's overseas income declaration, if it is withheld by a domestic unit or withheld and entrusted by an overseas institution, If a domestic unit pays on its behalf, the declaration shall be made on a one-by-one basis, and the exchange rate on the last day of the previous month shall be applicable.

If the declaration is made by a resident individual in the following year, the final settlement declaration shall be based on the central parity rate of the RMB exchange rate on the last day of the previous tax year.