Broadly defined as having profit <500,000 RMB/year
2As outlined by the Chinese Government
Individuals working in China Mainland are also taxed. The tax is called Individual Income Tax (IIT) and is levied according to 11 different categories of income:
Table Developer @SJGrand
If you work in China, I suggest having a clear picture on how the IIT works on your salary. Normally, the employer directly withholds the rate proportioned to your salary every month. Even if it’s automatic, I’d rather be sure that the portion of money you don’t see every month is correct.
For wages and salaries, Chinese employees may deduct 3,500 RMB for the calculation of the IIT; while foreigners deduct 4,800 RMB.
How to calculate the IIT for Chinese employees and for expatriates?Table Developer @SJGrand
IIT calculation (the social insurance and housing funds to be deducted are in accordance with Shanghai’s rates)
Chinese Staff
Tax liability = gross salary + taxable benefits – employee social insurance contribution – mandatory housing fund employee mandatory housing fund contribution – RMB 3,500
Tax payable = (taxable income x applicable tax rate) – quick deduction
Example
Gross salary= RMB 15,000
Employee social insurance contribution= RMB 1,286
Employee mandatory house fund contribution= RMB 818
Tax free threshold= RMB 3,500
Tax liability= 15000 – 1,286 – 818 – 3,500 = 9,396
Tax payable= (9396 x 0.25) – 1,005 = 1,344
Net salary= 15000 – 1286-818-1,344=11,552
Expatriate Staff
Tax liability = gross salary + taxable benefits – deductible expenses – employee social insurance contribution – RMB 4,800
Tax payable = (taxable income x applicable tax rate) – quick deduction
Example:
Gross salary= RMB 15,000
Deductible expenses= RMB 500
Employee social insurance contribution= RMB 1,286
Tax free threshold= RMB 4,800
Tax liability= 15,000 – 500 – 1,286 – 4,800 = 8,414
Tax payable= (8,414 x 0.20) – 555 = 1,127.8
Net Salary= 15,000 –1286- 1,127.8 = 12,586.2
Review the types of taxes you will be subject to, including their amount and specific periodicity.
The text you read above should be referenced as general information and should not be solely relied upon for tax decisions. I highly advise professional consultation as each project may have different tax implications.
