InformationMoney-Wise

How is an ESL teacher’s tax calculated in China?

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.

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.

 

For example

Suggest that your monthly income is 15,000 RMB.

  1. Minus 4,800 from 15,000 [15000- 4800= 10200]. So 10200 is your taxable income.
  2. Find the correct tax(25%) and deduction(1005 ) from the chart.
  3. Mutiply the correct tax(25%) by your taxable income(10200 ) and then subtract the deduction part(1005). [10200* 25%- 1005= 1545]
  4. Finally the number 1545 is your tax and you can take 13,455 RMB home.
 Salary before tax/ (RMB/month)  Salary after tax (RMB/month)
13,000 11,915
14,000 12,705
15,000 13,455
16,000 14,205