Most foreign citizens who work in China for longer than 90 days (or 183 days if your country has signed a double taxation treaty with China) are liable to pay Individual Income Tax (IIT). Here’s a guide to how it is calculated; for information on who pays income tax, see this page.
What you need to know
1. Article 2 of the Individual Income Tax Law of the PRC defines forms of taxable income earned by foreign citizens working in China to include income from:
- Wages and salaries
- Remuneration for services
- Author’s remuneration
- Royalties
- Interest, dividends and bonuses
- Lease of property
- Transfer of property
- Contingent income
- Other income specified as taxable by the Finance Department of the State Council
2. The minimum tax threshold for foreign nationals working in China is normally 4,800 yuan. Income up to this level is not taxed.
3. A progressive tax rate is applied to all income earned above the 4,800 yuan threshold. See the table below to work out which tax band your Monthly Taxable Income places you inside.
|
Band
|
Monthly Taxable Income
(monthly salary minus 4,800 yuan)
|
Tax Rate (%)
|
Quick Deduction
|
|
1
|
Income of 1,500 yuan or less
|
3
|
0
|
|
2
|
1,500-4,500 yuan
|
10
|
105
|
|
3
|
4,500-9,000 yuan
|
20
|
555
|
|
4
|
9,000- 35,000 yuan
|
25
|
1,005
|
|
5
|
35,000-55,000 yuan
|
30
|
2,755
|
|
6
|
55,000-80,000 yuan
|
35
|
5,505
|
|
7
|
More than 80,000 yuan
|
45
|
13,505
|
4. To calculate the exact amount of income tax you can expect to pay, follow the following steps:
- Work out your monthly taxable income. Monthly taxable income = total monthly salary minus 4,800 yuan.
- Find the relevant tax rate and “quick deduction” for your monthly taxable income.
- Divide the tax rate by 100 to convert it from a percentage to a decimal.
- To work out how much tax you are liable to pay, multiply the decimalized tax rate by your monthly taxable income, then subtract the “quick deduction.”
5. For example, suppose you are a foreigner earning 10,000 yuan per month in China:
- Monthly taxable income = 10,000 yuan minus 4,800 yuan = 5,200 yuan
- With a monthly taxable income of 5,200 yuan, you are taxed at a rate of 20 percent. Your “quick deduction” is 555 yuan.
- Convert the tax rate from a percentage to a decimal: 20/100 = 0.2
- Work out your final tax liability: (0.2 x 5,200) – 555 = 485 yuan
- As your employer will deduct your 485 yuan Individual Income Tax from your salary, your final salary after tax will be 9,515 yuan.
6. Excluding income made from salaries and wages, all other types of taxable income (outlined in full in number 1 above) are taxed at 20 percent of their full value.
Useful Chinese words and phrases
| 税 |
shuì |
Tax |
| 个人所得税 |
gè rén suǒ dé shuì |
Individual Income Tax |
Useful links
The State Administration of Taxation of the People’s Republic of China
Shanghai Municipal Bureau of Local Taxation
Image by Rlicul.，source：onestop
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