A Brief Guide: Income Taxes for Expats in China

Posted 2021-04-29 GuideinChina

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Note: Recently, we have received various taxes enquiries from some followers and they had suggested that GiC team should write something about this for their reference. Having studied the above topic, GiC team had concluded the following brief overview for those who are interested to learn more.

What is Monthly Taxable Income?

According to the Individual Income Tax Law of the PRC, the minimum tax threshold for foreign nationals working in China is normally 4,800 yuan. Income up to this level is not taxed. A progressive tax rate is applied to all income earned above the 4,800 yuan threshold. See the table below to work out your Monthly Taxable Income.

Steps to calculate income tax

● 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, and then subtract the “quick deduction.”

Example to calculate the income tax

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.

Forms of Taxable Income

• 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

The duration of stay also determines your tax liability

How long you stay in China also affects how much tax you have to pay, and on what kind of income you are required to pay tax.

● 90 days or below

A foreigner who works in China for less than 90 days in a year (from January 1st to December 31st) only has to pay tax on income paid by Chinese companies for work done in China. In some cases, a bilateral agreement between your country and China can extend the 90 days period to 183 days.

● 90 days to 1 year

A foreigner resident who works in China from between 90 days to 1 year has to pay tax on all income earned within China, regardless of whether it is paid by foreign or Chinese companies.

● 1 year to 5 years

Those residents working in China for 1 year to 5 years have to pay tax on all income, except that paid by foreign employers for work done outside of China.

● More than 5 years

Residents working in China for more than 5 years may end up complying to the same tax rules as Chinese residents.

Paying even more tax

Depending upon the laws of your country, you may have to pay tax in your own country even while living and working in China. This situation might be avoided if your country has a bilateral tax agreement with China, or if your government does not require citizens living abroad to pay tax.

Useful Chinese words and phrases

税	shuì	Tax
个人所得税	gè rén suǒ dé shuì	Individual Income Tax

This is for your reference only and please do not hesitate to consult your personal consultant of this field.

Pictures are from the internet

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