21 Jan How to: Deal with your personal income taxes in China [2019 Update]
A recent change to the individual tax laws is that non-residents are considered residents for tax purposes if they spend more than six months working in China. The importance here is that residents are taxed on both national AND international incomes (individual & business tax), while non-residents are only taxed on national incomes.
As per legislation, anyone who spends 183 days or more in the mainland is classified a ‘resident tax-payer’. Previously, the requirement was 12 months.
Foreigners however, can avoid paying tax on their international incomes if they meet a simple requirement – spend more than 30 consecutive days outside the country in any given six-year period. Thus, they can avoid declaring international income.
Individual Income Tax Rates
|Income from Wages/Salaries||Progressive rates|
|CNY 0 – 1,500||3%|
|CNY 1,501 – 4,500||10%|
|CNY 4,501 – 9,000||20%|
|CNY 9,001 – 35,000||25%|
|CNY 35,001 – 55,000||30%|
|CNY 55,001 – 80,000||35%|
|CNY 80,001 and above||45%|
|Income from Private Businesses
(Taxable income = Total Revenue – Costs – Expenses – Losses)
|CNY 0 – 15,000||5%|
|CNY 15,001 – 30,000||10%|
|CNY 30,001 – 60,000||20%|
|CNY 60,001 – 100,000||30%|
|CNY 100,001 and above||35%|
|Income for personal services||Progressive rates|
|CNY 0 – 20,000||20%|
|CNY 20,001 – 50,000||30%|
|CNY 50,001 and above||40%|
Fixed at 20%, this category also includes royalties, author remuneration, rental, interest and dividends income.
Deductions and Tax Credits
Those on wages and salaries receive a flat monthly deduction of CNY 3,500.
Charitable contributions to a qualified domestic non-profit are deductible up to 30%.
Deductions for labour, author remuneration, rent and royalties: Amount in single payment under CNY 4,000 qualifies for deduction of CNY 800, otherwise 20% of the payment.
Special Expatriate Tax Regime
Foreigners on wages and salaries receive an additional flat monthly deduction of CNY 1,300 (totaling CNY 4,800).
Corporate Tax Rates
Capital Gains Tax
No separate corporate capital gains tax rate, this is combined with the operating income and taxed at the usual corporate (25%) income rate.
Real estate sales and net development costs are subject to Land Appreciation tax. The purchase cost is deducted from the sale price at the 20% rate. When the capital gains are more than 50% of the purchase price, the rate of capital gains tax fluctuates between 30% – 60%. (It is 60% when the capital gain is over 200% when compared to the cost).
Deductions and Tax Credits
Effective from Jan 2018 to Dec 2020, small and micro businesses with annual income of up to CNY one million are eligible for halved income tax.
Small and micro businesses employee training cost are now eligible for tax deduction of 8% (previously only high-tech companies).
Reporting Dates and Payment
Tax year from 1-January to 31-December. It is compulsory to file a report and pay advances monthly.
The date for submitting an annual report and arranging payments is up until 31-May. There are fines on arrears. Foreign companies in China are obligated to submit an interim report every three months (advance payments should be paid within 15 days of the end of the quarter).
An individual whose entire income in China is from a salary or whose income is subject to a deduction of tax at source is exempt from submitting an annual report.
An employer is obligated to submit a monthly report on his employees’ wages and to pay the tax deducted within 7 days of the end of the previous month.
An employer is obligated to deduct tax at source monthly from a salaried employee and to make additional contributions to social security.
Social security in China consists of five parts, rates differ across cities:
|Pension||[employer & employee contribution]|
|Medical||[employer & employee contribution]|
|Unemployment||[employer & employee contribution]|
|Work-related injury||[employer contribution]|
Pension rates are approximately 15-20% for employers and 7-9% for employees.