SAT Provides Clarity on IIT Collection and Administration for Cash Awards Paid for the Transformation of On-duty Scientific and Technological Achievements
The State Administration of Taxation ("SAT") has recently issued the Announcement on Matters Concerning the Collection and Administration of Individual Income Tax on Cash Awards Received by Scientific and Technological Staff for the Transformation of On-duty Scientific and Technological Achievements (the "Announcement"), with effect from July 1, 2018.
The Announcement explicitly states that, the term "within three years (equivalently 36 months)", as mentioned in the third item under Article 5 of the policy document (Cai Shui [2018] No.58) means within 36 months from the date a non-profit scientific research institute or an institution of higher learning obtains the income from the transformation of scientific and technological achievements in practice. According to the Announcement, when an employer declares cash awards paid to their employees and fills in the Statement for the Withdrawal of Individual Income Tax (IIT), it shall consolidate the amount of cash awards offered for the transformation of on-duty scientific and technological achievements in the current period and the income of salaries and wages for the current month, provide the consolidated amount in the Column "Amount of Income" and 50 percent of the cash awards offered in the Column "Tax-exempt Income" of the Statement for the Withdrawal of Individual Income Tax, and specify in the Column "Note" of this statement "Tax-exempt Portion of Cash Awards Offered to Scientific and Technological Staff"; the individual income tax due shall be calculated based on the balance of the sum provided in the Column "Amount of Income" minus the sum provided in the Column "Tax-exempt Income" and applicable deductions.