The preferential policies for one-time bonuses for personal income tax are as follows:

Resident individuals receiving one-time bonuses for the whole year are in compliance with the "State Administration of Taxation's Regulation on Adjusting the Calculation and Taxation of Individuals' One-time Bonuses for the Year" "Notice on Income Tax Methods" (Guo Shui Fa [2005] No. 9) shall not be incorporated into the comprehensive income of the current year. The amount obtained by dividing the annual one-time bonus income by 12 months shall be converted on a monthly basis as attached to this notice. Comprehensive income tax rate table, determine the applicable tax rate and quick calculation deductions, and calculate tax separately.

The calculation formula is: tax payable = annual one-time bonus income × applicable tax rate - quick calculation deduction

The annual one-time bonus refers to deductions for administrative agencies, enterprises and institutions, etc. A one-time bonus paid by the payer to employees based on their annual economic benefits and a comprehensive assessment of their annual work performance. To put it bluntly, it is what we commonly call the year-end bonus.

This includes year-end salary increases, and annual salary and performance pay realized by units that implement annual salary systems and performance pay methods based on assessment results.

There are two main methods for calculating the annual one-time bonus discount: The first one: if it meets the relevant regulations, it will not be included in the comprehensive income of the year. The annual one-time bonus income is divided by 12 months. The amount shall be determined according to the monthly converted comprehensive income tax rate table attached to this notice, the applicable tax rate and quick calculation deduction shall be determined, and the tax shall be calculated separately.

Second type: Resident individuals who receive a one-time bonus throughout the year can also choose to incorporate it into their comprehensive income for tax calculation.

In a tax year, this tax calculation method is only allowed to be used once for each taxpayer.

For units that implement the annual salary system and performance-based pay, the annual salary and performance-based pay that individuals receive at the end of the year shall be governed by Articles 2 and 3 of this notice.

Legal Basis

The "Notice of the Ministry of Finance and the State Administration of Taxation on the Convergence of Preferential Policies after the Revision of the Personal Income Tax Law" (Caishui [2018] No. 164) stipulates that the annual one-time The preferential policy for separate tax calculation of bonuses has been extended to December 31, 2023; the preferential policy for separate tax calculation of equity incentives of listed companies has been extended to December 31, 2022.

The "Announcement of the Ministry of Finance and the State Administration of Taxation on Policy Issues Related to the Final Settlement and Settlement of Comprehensive Personal Income Tax" (Ministry of Finance and the State Administration of Taxation Announcement No. 94 of 2019) exempts the individual from handling comprehensive personal income tax. The preferential policy for income settlement and settlement has been extended to December 31, 2023.