According to the provisions of the General Administration's "Notice on Issues Concerning Adjusting the Method for Calculating and Collecting Individual Income Tax on Lump-sum Bonuses and Other Income Obtained by Individuals" (Guoshui Fa [2005] No. 9), for taxpayers who receive a one-time annual bonus, it shall be calculated as a separate month’s salary or wages income for tax purposes. "First, divide the one-time annual bonus obtained by the employee in that month by 12 months, determine the applicable tax rate and quick deduction amount based on the quotient," then calculate the tax according to "the determined applicable tax rate and quick deduction amount." This method is only allowed to be used once for each taxpayer within a tax year.
The first method: Calculation when the year-end bonus is higher than (or equal to) the deductible expenses
According to the regulations on paying taxes on year-end bonuses,