Knowledge sharing | What is the difference between wages, salaries, and service remuneration? How is income of temporary workers and interns taxed?

1. The difference between wages and salaries and labor remuneration

Income from wages and salaries:

It refers to income obtained by individuals due to employment or being employed, including wages, salaries, bonuses, year-end salary increases, labor dividends, allowances, subsidies, and other income related to employment or being employed.

Income from labor remuneration：

It refers to income obtained by individuals from providing labor services, including income from design, decoration, installation, drawing, testing, medical treatment, law, accounting, consulting, teaching, translation, manuscript review, calligraphy and painting, carving, film and television, audio recording, video recording, performance, advertising, exhibition, technical services, introduction services, brokerage services, agency services, and other labor services.

The difference between the two：

Income from wages and salaries belongs to non-independent personal labor activities, that is, remuneration obtained from holding a post or being employed in organs, organizations, schools, military units, enterprises and institutions, and other organizations; income from labor remuneration is remuneration obtained by an individual independently engaging in various skills and providing various labor services. The main difference between the two is that the former involves an employment and employed relationship, while the latter does not.

2. Different calculation methods

（1) When withholding agents pay wages and salaries to resident individuals, they shall calculate the withheld tax according to the cumulative withholding method and handle full-staff full-amount withholding filing on a monthly basis. The specific calculation formula is as follows:

Tax amount to be withheld and prepaid this period = (cumulative taxable income for withholding and prepayment × withholding rate - quick deduction) - cumulative tax reduction and exemption amount - cumulative withheld and prepaid tax amount

Taxable income for cumulative withholding and prepayment = cumulative income - cumulative tax-exempt income - cumulative deduction - cumulative special deductions - cumulative special additional deductions - cumulativeOther deductions determined in accordance with the law

Among them: the cumulative deduction expense is calculated as 5,000 yuan/month multiplied by the number of months the taxpayer has been employed at the unit in the current year up to the current month.

（2) Withholding agents shall withhold and prepay individual income tax on a per-payment or monthly basis when paying remuneration for labor services to resident individuals. The specific withholding and prepayment method is as follows:

For income from labor remuneration, the income amount is the balance after deducting expenses from the income.

Deduction: where each income from remuneration for labor services does not exceed 4,000 yuan, the deduction is calculated at 800 yuan; where each income exceeds 4,000 yuan, the deduction is calculated at 20 percent.

Taxable income: for income from remuneration for personal services, the amount of income each time shall be the taxable income for withholding and prepayment. For income from remuneration for personal services, an excess progressive withholding rate of 20 percent to 40 percent applies.

Tax to be withheld and prepaid on income from labor remuneration = taxable income for withholding and prepayment × withholding rate - quick deduction

3. Illustration

（1）The company hired temporary workers. Should the money paid be withheld for individual income tax as "wages and salaries" or as "remuneration for labor services"?

Income from wages and salaries belongs to non-independent personal labor activities, that is, remuneration obtained from holding a post or being employed in organs, organizations, schools, military units, enterprises and institutions, and other organizations; income from labor remuneration is remuneration obtained by an individual independently engaging in various skills and providing various labor services. The main difference between the two is that the former involves an employment and employed relationship, while the latter does not.

If a temporary worker has an employment relationship with the unit, file and pay tax as wages and salaries income; if the temporary worker has no employment relationship with the unit, file and pay tax as remuneration for labor services income.

（2）For student interns recruited by the company, should individual income tax be withheld and prepaid as "wages and salaries" or as "remuneration for labor services" at the time of filing?

Internship wages for student interns should be withheld and prepaid as individual income tax under "labor remuneration," not "wages and salaries." It is a special type of "labor remuneration" that can be filed with a monthly deduction of 5,000 yuan.

Where a student receiving full-time academic education obtains labor remuneration income due to an internship, the withholding agent may calculate and withhold and prepay individual income tax according to the cumulative withholding method when withholding and prepaying individual income tax. The specific calculation formula for withholding and prepaying individual income tax under the cumulative withholding method is as follows:

Tax amount to be withheld and prepaid this period = (cumulative income amount - cumulative deduction expenses) × withholding rate - quick deduction - cumulative tax reduction and exemption amount - cumulative withheld and prepaid tax amount

Among them, the cumulative deduction expense is calculated as 5,000 yuan/month multiplied by the number of internship months from the month the taxpayer started the internship at the unit to the current month.

Policy basis

"Individual Income Tax Law of the People's Republic of China"

"Implementing Regulations of the Individual Income Tax Law of the People's Republic of China" (State Council Order No. 707 of the People's Republic of China)

Notice of the State Taxation Administration on Issuing the Provisions on Several Issues Concerning the Collection of Individual Income Tax (Guo Shui Fa [1994] No. 89)

Notice of the Ministry of Finance and the State Taxation Administration on Issues Concerning Income Tax Policies for Enterprises Paying Student Internship Remuneration (Cai Shui [2006] No. 107)

Announcement of the State Taxation Administration on Issuing the Measures for the Administration of Individual Income Tax Withholding Filing (Trial) (Announcement No. 61 of 2018 of the State Taxation Administration)

Announcement of the State Taxation Administration on Improving and Adjusting the Withholding and Prepayment Methods for Individual Income Tax of Certain Taxpayers (State Taxation Administration Announcement No. 13 of 2020)

Source: Shanghai Tax official account

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