It is your duty to pay tax when living and working in a country, even in foreign country. So how is your tax calculated in China? The tax system in China is relatively complicated for newcomers to understand.
What kinds of income should be taxed?
There are 11 possible sources of income which could be taxed in China:
- Employment income
- Business income (sole proprietorship)
- Business income (contract or lease basis)
- Payment for labour services
- Author’s remuneration
- Interest, and investment income such as dividends
- Rental income
- Capital gain from transfer of property
- Incidental income.
- Any other income deemed to be taxable by the Ministry of Finance of the State Council.
How is the tax calculated?
If your salary is lower than 4,800 RMB (around 700 USD), then you don’t have to pay the individual income tax. But if you do earn at least 4,800 RMB, you’ll be taxed. The more you earn, the more you have to pay.
So, if you are eligible to be taxed, how to make sure the correct rate for your income bracket ? Here are several steps.
- 1. Firstly, you should figure out your monthly income before taxed, and then subtract 4,800 RMB from it. (monthly income- 4,800= taxable income)
- 2.Find the correct tax rate and deduction in the monthly taxable income chart.
- 3. Then multiply the percentage by your taxable income. After you get the result remember to subtract the deduction part. The final number is the amount of tax you’ll be responsible for paying in China.
How long you stay in China would also have an influence on your tax duty.
- If you’re in China for less than 90 days in a particular tax year, and your income comes from an overseas employer with no permanent base in China, you don’t have to pay tax in China.
- If you’re from a country with a double taxation agreement with China, then this is extended to mean you’re able to stay for up to 6 months – 183 days – without having to pay tax.
- If you live in China for more than 90/183 days, but less than a year, then you’re taxed only on income derived from China.
- If you’re in China for between 1 and 5 years, you’ll pay tax in China on your worldwide income, but with some concessions available to reduce the tax burden.
- If you stay in China for more than 5 years, you’ll pay full tax on your worldwide income in China.
Suggest that your monthly income is 15,000 RMB.
- Minus 4,800 from 15,000 [15000- 4800= 10200]. So 10200 is your taxable income.
- Find the correct tax(25%) and deduction(1005 ) from the chart.
- Mutiply the correct tax(25%) by your taxable income(10200 ) and then subtract the deduction part(1005). [10200* 25%- 1005= 1545]
- Finally the number 1545 is your tax and you can take 13,455 RMB home.
|salary before tax||salary after tax|