How to calculate Foreigner’s Income Tax in China?

What is the income tax rate in China?

The individual income tax (IIT) is a progressive rate starting at 3% and going up to a maximum of 45%. We have shown the different bands below for 2020.

 

How to calculate the tax?

It can be difficult to calculate the exact income tax. Here we have some examples below:

Both Foreigners and Chinese individuals working in China should pay income taxes on their earnings.
Since the 1st of October 2018, the new policy took effect to ease the tax burden for low- and mid-income earners while taking a tougher tax burden on high-earners and foreign workers in China.

So, how to calculate your income tax as a foreigner working in China?

The first 5,000RMB of the income of foreigners is tax-free, given as tax allowance.

The general formula is: Tax payable= (Income- Tax Allowance) x tax percentage – quick deduction

  1. If your income is less than 5,000RMB per month, then you pay no tax.
  2. If your income is more than 5,000RMB and less than 8,000RMB per month, then you pay only a 3% tax.

For instance, if your income is 6,000RMB, then your tax payable= (6,000-5,000) x 3%= 30RMB. So, if your income is 6,000RMB, you only pay 30RMB tax.

  1. If your income is more than 8,000RMB and less than 12,000RMB per month, then you pay 10% tax with quick deduction of 210RMB

For instance, if your income is 10,000RMB, then your tax payable= (10,000-5,000) x 10%-210= 290RMB. So, if your income is 10,000RMB, you pay 290RMB tax.

  1. If your income is more than 12,000RMB and less than 25,000RMB per month, then you pay 20% tax with quick deduction of 1,410RMB

For instance, if your income is 20,000RMB, then your tax payable= (20,000-5,000) x 20%-1410= 1590RMB. So, if your income is 20,000RMB, you pay 1590RMB tax.

  1. If your income is more than 25,000RMB and less than 35,000RMB per month, then you pay 25% tax with quick deduction of 2,620RMB

For instance, if your income is 30,000RMB, then your tax payable= (30,000-5,000) x 25%-2620= 3630RMB. So, if your income is 30,000RMB, you pay 3630RMB tax.

  1. If your income is more than 35,000RMB and less than 55,000RMB per month, then you pay 30% tax with quick deduction of 4,410RMB

For instance, if your income is 45,000RMB, then your tax payable= (45,000-5,000) x 30%-4410= 7590RMB. So, if your income is 45,000RMB, you pay 7590RMB tax.

  1. If your income is more than 55,000RMB and less than 80,000RMB per month, then you pay 35% tax with quick deduction of 7,160RMB

For instance, if your income is 70,000RMB, then your tax payable= (70,000-5,000) x 35%-7160= 15590RMB. So, if your income is 70,000RMB, you pay 15590RMB tax.

  1. If your income is more than 80,000RMB per month, then you pay 45% tax with quick deduction of 15,160RMB

For instance, if your income is 100,000RMB, then your tax payable= (100,000-5,000) x 45%-15160= 27590RMB. So, if your income is 100,000RMB, you pay 27590RMB tax.

Do you have some further questions about tax in China? You can contact Sarah at Easy Business Solutions in Beijing.

You can also complete the form below to ask any questions.

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