Individual Income Tax

To determine Individual income tax is payable or not is based on the source of income. Generally, wages and salaries received during employment in China, whether paid by corporate or personal employers inside or outside China, are income gained from the source within China.

Foreign nationals who are living in China for more than 90 days consecutively or cumulatively during one tax year, or for more than 183 days consecutively or cumulatively during the period provided by tax agreements shall declare individual income tax payable on their salaries paid by corporations and employers inside and outside China during their employment within China; however, the wages and salaries gained during their employment outside China, except when acting as members of top management in corporations within China, are not subject to individual income tax.

Basis of Assessment

Tax Payable = (Taxable Income of Salaries in/outside China in the Current Month × Tax Rate- Adjustment) × Salaries Paid inside China in the Current Month/Total Salaries paid in/outside China in the Current Month × Working Days inside China in the Current Month/Calendar Days of the Current Month

Requirements about Taxable Individual Income

• The starting point of taxation on the individual income of Chinese citizens from RMB2,000
• The starting point of taxation on individual income of foreign nationals from RMB4,800

Tax Rate

Notes: In the above, Monthly Taxable Income = Income from Salaries in the Current Month - Starting Point of Taxation (i.e. RMB2,000 or 4,800)

Avoidance of Double Taxation

Hong Kong citizens employed across the border are not subject to individual income tax levied by the Mainland Chinese government based on the following cases:

• In the case that they are employed by Hong Kong companies
• In the case that they are staying in Mainland China for not more than 183 days accumulatively, that is, from 1st January to 31st December of each year
• In the case that they are paid salaries by Hong Kong companies, which are not borne by corporations inside China

A Sample Case

Mr. Lee from Hong Kong is working as a Sales Manager in a multinational company in Shenzhen with a monthly salary of RMB25,800

Computation Analysis: His monthly taxable income is RMB21,000 (i.e. 25,800-4,800) In refer to the above schedule at Level 5 with a tax rate 25% and adjustment unit RMB1,375, his monthly individual income tax payable is calculated as follows:
Individual Income Tax Payable = Taxable Income × Applicable Tax Rate – Adjustment
= 21,000 × 25% - 1,375
= 3,875 Yuan

His monthly individual income tax payable is RMB3,875, to be withheld by the company to pay the tax on his behalf to the tax bureau.

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