Key Updates
SAP has released two-phase solutions for the 2026 China Individual Income Tax (IIT) withholding system updates:
Phase 1 (SAP Note 3710991): Manual operation approachPhase 2 (SAP Note 3746570): Hybrid approach combining automatic calculation with manual configuration
If your organization has frequent employee turnover, numerous back pay scenarios for terminated employees, or wants to reduce manual maintenance efforts, Phase 2’s automatic calculation approach will significantly improve efficiency.
1. Regulatory Changes Explained
1.1 Cumulative Basic Deduction Calculation Rule Optimization
Before the change:
The system automatically calculated cumulative basic deduction based on employee hiring month and tax period.
After the change:
Cumulative Basic Deduction = Current Period Basic Deduction +
