OVERVIEW OF CHINA INDIVIDUAL INCOME TAX
(1) Taxpayers
Any individual who has domicile in China or who has no domicile
in China but has resided in China for one year or more shall
pay Individual Income Tax on his world-wide income. Any individual
who is neither domiciled nor resident in China or who has
resided in China for less than one year shall pay Individual
Income Tax on the income from sources inside China.
(2) Taxable items and calculation of Individual Income Tax
payable
a. Wages and salaries
Wages and salaries are taxed on the basis of the balance
of taxpayer' s monthly wages and salaries after lump-sum deduction
of 800 yuan as expenses and by applying the nine-grade progressive
rates as shown in the table below.
Individual Income Tax Rates Schedule (1)
Grade |
Monthly Taxable Income |
Tax Rate (%) |
Quick Deduction |
1 |
Income of 500 yuan or less |
5 |
0 |
2 |
That part of income in excess of 500 to 2, 000 yuan
|
10 |
25 |
3 |
That part of income in excess of 2,000 to 5, 000 yuan
|
15 |
125 |
4 |
That part of income in excess of 5,000 to 20, 000 yuan
|
20 |
375 |
5 |
That part of income in excess of 20,000 to 40, 000 yuan
|
25 |
1375 |
6 |
That part of income in excess of 40,000 to 60, 000 yuan |
30 |
3375 |
7 |
That part of income in excess of 60,000 to 80, 000 yuan
|
35 |
6375 |
8 |
That part of income in excess of 80,000 to 100,000 yuan
|
40 |
10375 |
9 |
That part of income in excess of 100,000 yuan |
45 |
15375 |
The formula for computing the amount of tax payable is:
Monthly taxable income = Monthly aggregate wages/salaries
- 800 yuan
Monthly amount of tax payable = Monthly taxable income ×Applicable
rate - Quick deduction
The taxpayers who have no domiciles in China but earn wages
and salaries from China or who have domiciles in China and
earn wages and salaries from outside China may enjoy additional
expense deductions (currently 3200yuan per month) in addition
to the regular monthly deduction of 800 yuan in computing
the taxable income.
b. Individual household production or business operation income
With respect to the individual household production or business
operation income, the amount of tax payable is computed on
the basis of the balance of the gross annual production and
business operation income after deduction of the related cost,
expenses and losses and by applying the five-grade progressive
tax rates as listed in the table below.
Individual Income Tax Rates Schedule (2)
Grade |
Annual Taxable Income |
Tax Rate (%) |
Quick Deduction |
1 |
Income of 5,000 yuan or less |
5 |
0 |
2 |
That part of income in excess of 5,000 to 10,000 yuan |
10 |
250 |
3 |
That part of income in excess of 10,000 to 30, 000 yuan |
15 |
1250 |
4 |
That part of income in excess of 30,000 to 50, 000 yuan |
20 |
4250 |
5 |
That part of income over 50,000 yuan |
25 |
6750 |
The formula for computing the tax payable is:
Annual taxable income = Gross annual income of production
/business - Costs,expenses and losses
Tax payable for the year =Annual taxable income ×Applicable
tax rate - Quick deduction
c. Income from contracted or leased operation of enterprises
or institutions The income from contracted or leased operation
of enterprises or institutions is taxed on the basis of the
balance of the gross annual income after deduction of the
necessary expenses (currently 800 yuan per month) and by applying
the suitable tax rate in Individual Income Tax Rates Schedule(2)
above.
d. Remuneration for personal service, author' s remuneration,
royalties, income from lease of property
The income of remuneration for personal service, author's
remuneration, royalties and income from lease of property
are taxed on the basis of remaining sum of the income after
deduction of 800 yuan when each payment of the income is not
over 4,000 yuan or on the basis of the remaining sum of the
income after deduction of 20% of the income as the expenses
when each payment of the income is over 4,000 yuan and by
applying the rate of 20%. The formula for that is:
Taxable income= Cross value of taxable items - 800 yuan (or
20% of gross value of taxable items)
Amount of tax payable = Taxable income × 20 %
e. Income from transfer of property
The tax base is the balance of the proceedings derived from
transfer of property after deducting the original value of
the property and the reasonable expenses The applicable rate
is 20%. The formula for computing the amount of tax payable
is:
Taxable income = Proceedings from transfer of property - Original
value of property - Reasonable expenses
Amount of tax payable = Taxable income × 20 %
f. Interests, dividends, bonuses and contingent income
The tax on interest, dividends, bonuses, contingent income
and other income is based on each receipt of the income with
the rate of 20%. The formula for computing the income tax
payable is:
Tax payable = The full amount in each receipt ×20 %
(3) Main tax exemptions
The following income are exempt from income tax:
a. Awards for achievements in science, education, technology,
culture, public health, physical culture and environmental
protection granted by the Provincial People' s Governments,
Ministries and Commissions under the State Council, China's
People's Liberation Army Units at army level and above and
by foreign and international organizations;
b. Interest income on saving deposits, interest income on
National Bonds issued by the Ministry of Finance and interest
income on financial bonds issued upon approval by the State
Council;
c. Special governmental allowances provided in accordance
with the uniform regulations of the State Council and the
subsidies and allowances stipulated as being exempt by the
State Council;
d. Welfare benefits, survivor's pensions and relief payments;
e. Insurance indemnities;
f. Military severance payment and demobilisation payment received
by members of the armed forces;
g. Settlement payment, severance payment and retirement payment
received by public servants and workers under the uniform
provisions of the State;
h. Medical insurance pension and the basic retirement pension
saved and withdrawn according to relevant rules;
i. Income derived by diplomatic agents and consular officers
and other personnel who are exempt from tax under the provisions
of the relevant Laws of the People's Republic of China;
j. Income exempt from tax as stipulated in the international
conventions to which Chinese Government is a party and in
the agreements it has entered into.
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