08 May Income tax in China
Residents are generally subject to China individual income tax (IIT) on their worldwide income. Non-residents are generally taxed in China on their China-source income only.
An individual is taxed in China on one’s income by category. China’s IIT law groups personal income into 9 categories.
The 9 categories of income are:
- Employment income (i.e. wages and salaries)
- Remuneration for labour services
- Author’s remuneration
- Business income
- Interest, dividends, and profit distribution
- Rental income
- Income from transfer of property
- Incidental income
Each income category has its own tax rate(s), allowable deductions, etc.
For residents, employment income, remuneration for labour services, author’s remuneration and royalties are combined as ‘comprehensive income’ for aggregate tax calculation purpose on an annual basis. Income from the other categories is taxed separately by category on a monthly or transaction basis.
For non-residents, income from each of the 9 categories is taxed separately on a monthly or transaction basis.
Personal income tax rates
Comprehensive income tax rates
For residents, calculation of IIT on annual comprehensive income is based on progressive tax rates (see Table I below) using the following formula:
(Annual taxable income x Tax rate) – Quick deduction
|Annual taxable income (CNY)||Tax rate (%)||Quick deduction (CNY)|
|0 to 36,000||3||0|
|Over 36,000 to 144,000||10||2,520|
|Over 144,000 to 300,000||20||16,920|
|Over 300,000 to 420,000||25||31,920|
|Over 420,000 to 660,000||30||52,920|
|Over 660,000 to 960,000||35||85,920|
Notes : Annual taxable income after deducting the standard basic deduction, specific deductions, specific additional deductions and other allowable deductions
For non-residents, IIT on employment income, remuneration for labour services, author’s remuneration and royalties is calculated by each category on a monthly or transaction basis at below progressive tax rates (see Table II below).
|Monthly taxable income (CNY)||Tax rate (%)||Quick deduction (CNY)|
|0 to 3,000||3||0|
|Over 3,000 to 12,000||10||210|
|Over 12,000 to 25,000||20||1,410|
|Over 25,000 to 35,000||25||2,660|
|Over 35,000 to 55,000||30||4,410|
|Over 55,000 to 80,000||35||7,160|
Business income tax rates
Income earned by individuals from privately-owned businesses, sole proprietorship enterprises, or partnerships is generally subject to IIT at progressive rates from 5% to 35%, as follows:
|Annual taxable income (CNY)||Tax rate (%)|
|0 to 30,000||5|
|Over 30,000 to 90,000||10|
|Over 90,000 to 300,000||20|
|Over 300,000 to 500,000||30|
Tax rates for other personal income
A flat rate of 20% is applied on the remaining categories of income, including incidental income, rental income, interest income, dividends, and capital gains, unless specifically reduced by the State Council.