How do individuals issue labor service invoices on their behalf? What taxes and fees must be paid?

In daily life, when individuals receive remuneration by providing labor services (such as technical, design, consulting services, etc.), the hiring enterprise usually requires the individual to issue a VAT invoice. So, what taxes and fees must individuals pay when issuing labor service invoices on their behalf? What is the operating process? Let's learn about it together today~

★ Taxes and fees payable at the time of agency issuance

▪ VAT

In 2024, for labor services provided by individuals, the VAT levy rate is 3% reduced to 1%, and individuals are exempt from VAT for each invoice issuance amount of 500 yuan or less (inclusive) per transaction (day).

▪ Policy basis

Announcement of the Ministry of Finance and the State Taxation Administration on VAT Reduction and Exemption Policies for Small-Scale VAT Taxpayers (Announcement No. 19 of 2023 of the Ministry of Finance and the State Taxation Administration)

Notice of the Ministry of Finance and the State Taxation Administration on Comprehensively Piloting the Replacement of Business Tax with Value-Added Tax (Cai Shui [2016] No. 36)

Notice of the Beijing Municipal Finance Bureau, Beijing Municipal State Taxation Bureau and Beijing Municipal Local Taxation Bureau Forwarding the Notice of the Ministry of Finance and the State Administration of Taxation on Tax Policies for the Pilot Program of Replacing Business Tax with VAT in the Transportation Industry and Certain Modern Service Industries Nationwide (Jing Cai Shui [2013] No. 1184)

▪ Urban maintenance and construction tax

Based on the actually paid VAT as the tax calculation basis, from January 1, 2023 to December 31, 2027, urban maintenance and construction tax is levied at half rate on small-scale VAT taxpayers.

Urban district: tax rate 7%

County towns and towns: tax rate 5%

Outside urban districts, county towns or towns: tax rate 1%

▪ Policy basis

"Urban Maintenance and Construction Tax Law of the People's Republic of China" (Order No. 51 of the President of the People's Republic of China)

Announcement of the Ministry of Finance and the State Taxation Administration on Further Supporting the Development of Small and Micro Enterprises and Individual Industrial and Commercial Households with Relevant Tax and Fee Policies (Announcement No. 12 of 2023 of the Ministry of Finance and the State Taxation Administration)

▪ Education surcharge、Local education surcharge

The education surcharge and local education surcharge involved in invoice issuance for individuals for labor services are also based on the actual VAT paid; monthly sales of less than 100,000 yuan are exempt, and amounts exceeding 100,000 yuan may be levied at half rate together with urban maintenance and construction tax.

▪ Policy basis

Notice of the Ministry of Finance and the State Taxation Administration on Expanding the Scope of Exemption of Certain Government Funds (Cai Shui [2016] No. 12)

Announcement of the Ministry of Finance and the State Taxation Administration on Further Supporting the Development of Small and Micro Enterprises and Individual Industrial and Commercial Households with Relevant Tax and Fee Policies (Announcement No. 12 of 2023 of the Ministry of Finance and the State Taxation Administration)

▪ Individual income tax

Where individual taxpayers obtain income from labor remuneration, author's remuneration, or royalties and need to have invoices issued on their behalf, individual income tax is no longer levied at the invoice issuance stage. Their individual income tax shall be withheld in advance (or withheld) and full-staff full-amount withholding declaration shall be handled by the withholding agent in accordance with the provisions of the Announcement of the State Taxation Administration on Issuing the Measures for the Administration of Individual Income Tax Withholding Declaration (Trial) (State Taxation Administration Announcement No. 61 of 2018).

★ Kailing TechnologyAgency issuance platformGoods、Service generalAgency issuance invoice process

Kailing TechnologyThe agency issuance platform is built on the new electronic tax bureau and supports full-process online operations for individuals. The main steps include:  

▪ Real-name registration and face-scan authentication: individuals must complete real-name authentication and pass facial recognition verification for the first time.  

▪ Bureau-side review: if review exceeds 30 minutes, face scanning must be repeated to ensure the authenticity of the invoicer's identity.  

▪ Fill in invoicing information。  

▪ Invoice tax payment: supports WeChat/Alipay QR code payment, UnionPay payment, and bank batch withholding.  

▪ Download invoices and tax payment certificates: obtain electronic invoices and tax payment vouchers immediately after successful invoicing.  

★ Key Technical Solutions  

▪ Industry-leading facial recognition technology:  

  Users directly call the face-scan function within the business party's App, without jumping to or downloading other applications, improving operational convenienceand security compliance。  

▪ UnionPay payment automation:  

  Enterprises can bind a dedicated bank card. The platform automatically fills in the card number, password and verification code, and completes payment through multi-dimensional verification (amount, tax authority, time), reducing manual intervention.  

★ Invoice red reversal and tax refund  

▪ Process: log in to the electronic tax bureau → invoice issuance for individuals → red-letter reversal of invoice issuance for individuals;  

▪ Timeliness: after red-letter reversal, the invoice tax is generally refunded via the original route on T+1.  

★ Individual income tax filing and annual settlement solution  

1. Individual income tax withholding and remittance:

   ▪ The invoice recipient must complete withholding and remittance of individual income tax before the 15th of the following month, otherwise the invoice may not be used as a pre-tax deduction voucher.  

   ▪ Supports centralized processing of individual income tax filing through the withholding terminal of the electronic tax bureau.  

2. Annual final settlement and payment:

   ▪ Individual income tax on labor remuneration is withheld and remitted by the invoice recipient, and individuals can complete the annual settlement through the Individual Income Tax App.  

The Kailing Invoice Issuance for Individuals Platform solution optimizes the invoicing process through digital technology, solves enterprise compliance challenges and reduces operating costs. The system supports multi-scenario payments, automated tax calculation, and adapts to the regulatory requirements of China Golden Tax Phase IV, providing enterprises withand individualsProvides safe and efficient business-finance-tax solutions.

Welcome enterprises with relevant needs to contact Kailing Technology:https://www.kailingteck.com/h-col-126.html 。

As a comprehensive business-finance-tax digitalization solution service provider, Kailing Technology provides business-finance-tax management digital transformation products and operational services for various government agencies, institutions, and large, medium, and small enterprises. The product line includes:

Solutions for sales contract management system, procurement contract management system, fully digitalized Leqi interface project, automatic output VAT invoicing system, invoice issuance for individuals system, employee expense control and reimbursement system, input VAT invoice management system, supply chain collaborative reconciliation system, imaging OCR recognition system, automatic financial bookkeeping system, electronic accounting archives system and other businesses, comprehensively advancing the digitalization process across various fields.

If you have any business-finance-tax digital transformation needs, welcome to contact us. Beijing Kailing Technology will serve you wholeheartedly.