Invalid interval? Separate or combined tax calculation? How to plan? An article explains the annual bonus tax issue
Author | Lawyer Liu Kun
Issuing annual bonuses is what most employees look forward to all year round, and the importance is self-evident. Under what circumstances is the higher the annual bonus, the lower the after-tax income? Should the annual bonus be taxed together or separately? How to use the annual bonus for personal income tax planning? This article will answer the personal tax questions of the annual bonus for readers from these three aspects.
What is the range of the annual bonus invalidity range?
The invalid range of the annual bonus refers to the year-end bonus amount in this range, but the bonus received is less, as follows:
For example, the annual bonus is 36001 yuan, the individual income tax payable separately is 36001 × 10% -210 = 3390.1 yuan, and the after-tax income is 36001-3390.1 = 3 2610.9 yuan.
But if the annual bonus is 36,000 yuan, the individual income tax payable separately is 36,000 × 3% -0 = 1080 yuan, and the after-tax income is 36,000-1080 = 34,920 yuan.
With an extra 1 yuan annual bonus, the employee's after-tax income is 2309.1 yuan less.
The above phenomenon occurs because of the "Notice of the State Administration of Taxation on Adjusting the Methods of Calculating and Collecting Individual Income Tax for Individuals Receiving Annual One-time Bonuses, etc." (Guo Shui Fa [2005] No. 9, the effect has been extended to December 31, 2027, hereinafter referred to as the "Notice").
The annual one-time bonus can be excluded from the comprehensive income and calculated separately as personal income tax.
However, when the annual bonus is taxed separately, the annual bonus should be converted monthly first, and then the corresponding tax rate and quick deduction should be found. The details are as follows:
Converting the annual bonus to a monthly basis does not change the tax rate applicable to the annual bonus, but it will reduce the quick deduction for the annual bonus.
For example, the annual bonus of 50,000 yuan is taxed separately. According to the annual tax rate table of comprehensive income from personal income tax, the applicable tax rate is 10%, and the quick deduction is 2520 yuan.
However, according to the provisions of the Notice, it should be converted into 50,000 ÷ 12 = 4166.67 yuan on a monthly basis, and a 10% tax rate should be applied, but the quick deduction is only 210 yuan.
The quick deduction refers to the amount that can be deducted when the tax is calculated by the quick method. Originally, under the personal income tax excess progressive algorithm, the higher the income, the lower the after-tax income will not appear. However, the "Notice" changed the quick deduction calculated by the year to the monthly calculation, which led to the invalid range of the annual bonus.
Do you choose to tax the annual bonus separately or in combination?
Under normal circumstances, the annual bonus tax separately is more cost-effective than the combined tax, but if the employee's usual salary is deducted from the three insurances and one fund, infant care, children's education, further education, serious illness medical care, housing loan interest, housing rent, support for the elderly and other special projects after additional deductions, the remaining amount is less than 60,000 yuan, the annual bonus combined tax may be more cost-effective.
If you are unsure whether it is a separate tax or a combined tax, you can wait for the annual final settlement and payment. In the personal income tax APP, click Salary, click Merge or Not Merge on the bonus selection, and do not submit it at the last step. You can see the amount of tax refund or supplementary tax, and then click Return to change to another plan, so that you can compare which plan is more favorable.
How to use the annual bonus for personal income tax planning?
We can use the annual bonus tax separately for personal income tax planning. The core idea of this planning method is to divide the total income of employees into two parts: daily salary and annual bonus, and balance the income of the two parts to achieve the effect of reducing the applicable tax rate.
For example: in 2023, Zhang San's total salary income is 600,000 yuan, 100,000 yuan will be deducted for special projects, and 80,000 yuan will be deducted for special projects.
If Zhang San's wages are all paid on a monthly basis, when the annual settlement is settled, Zhang San's taxable income is 600000-60000-100000-80000=360000 yuan, and the personal income tax payable is 360,000 × 25% -31920 = 58080 yuan.
If 384,000 yuan is paid monthly, 216,000 yuan is used as an annual bonus method and taxed separately, the taxable income of Zhang San's daily salary is 384000-60000-100000-80000=144000 yuan, and the personal income tax payable is 144,000 × 10% -2520 = 11880 yuan.
The taxable income of the annual bonus part is 216000 × 20% -1410 = 41790 yuan. The personal income tax that Zhang San should pay is 11880 + 41790 = 53670 yuan, which is 4410 yuan more tax-saving than the plan.
If 500,000 yuan is paid monthly, 100,000 yuan is used as an annual bonus method and taxed separately, the taxable income of Zhang San's daily salary is 500000-60000-100000-80000=260000 yuan, and the personal income tax payable is 260,000 × 20% -16920 = 35080 yuan.
The taxable income of the annual bonus part is 100000 × 10% -210 = 9790 yuan. The personal income tax that Zhang San should pay is 35080 + 9790 yuan = 44870 yuan, which is 13,210 yuan more tax-saving than the first plan and 8,800 yuan more tax-saving than the second plan.
Therefore, the tax saving effect can be achieved by matching the proportion of daily salary and separate taxable annual bonus.
Lawyer Profile
Lawyer Liu Kun
Attorney of
Secretary General of the Real Estate Dispute Resolution Professional Committee of Zhiheng Real Estate and Construction Engineering Research Center
area of expertise
Corporate litigation, tax-related legal services
Workout and non-performing asset disposal
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