Individual Income Tax
The Individual Income Tax Law (IIT Law) 2018 clearly defines the concept of tax resident and non-tax resident. A tax resident shall be defined as an individual who has domicile within the territory of China or who has no domicile but has resided in the territory of China for a cumulative period of 183 days within a tax year. A tax resident shall pay Chinese IIT on his or her income derived from China and overseas. On the contrary, a non-tax resident shall be defined as an individual who has neither domicile nor residence in China, or who has no domicile and has resided in China for a cumulative period of less than 183 days within a tax year. A non-tax resident shall pay Chinese IIT on income derived from China. Besides, the new IIT Law introduces anti-tax avoidance rules to arrangements aimed at reducing, exempting or deferring tax payments.
Tax Year
From 1 January to 31 December
Taxable Item
- Income from wages and salaries
- Income derived from remuneration for personal services
- Income derived from remuneration for manuscripts
- Income derived from royalties
- Income derived from business operations
- Income from interests, dividends and bonuses
- Income from lease of property
- Income from transfer of property
- Contingent income
Taxable Income Calculation
| Taxable Item | Calculation Method | Calculation Method | |||
|---|---|---|---|---|---|
| Tax Resident | 1. | Income from wages and salaries | Taxable Income = Annual Income - CNY 60,000 - special deduction items - additional special deduction items - other deduction items | Non-Tax Resident | Taxable Income = Monthly Income - CNY 5,000 |
| 2. | Income derived from remuneration for personal services | Taxable Income = based on the income derived from remuneration for personal services, remuneration for manuscripts and royalties | |||
| 3. | Income derived from remuneration for manuscripts | ||||
| 4. | Income derived from royalties | ||||
| Tax Resident and Non-Tax Resident | 5. | Income derived from business operations | Taxable Income = Total Income - costs & expenses - losses | ||
| 6. | Income from interests, dividends and bonuses | Taxable Income = Amount received in each payment | |||
| 7. | Income from lease of property |
Taxable Income = Amount received in each payment - CNY 800 Taxable Income = Amount received in each payment -（Amount received in each payment*20%） |
|||
| 8. | Income from transfer of property | Taxable Income = Income - original value - reasonable expenses | |||
| 9. | Contingent income | Taxable Income = Amount received in each payment | |||
|
|||||
IIT Rate
- For comprehensive income, the progressive tax rate ranging from 3% to 45% shall be applied (see the appended tax rate schedule).
- For business operation income, the progressive tax rate ranging from 5% to 35% shall be applied (see the appended tax rate schedule).
- For income from interests, dividends and bonuses, lease of property and transfer of property and contingent income, a proportional rate of 20% shall applied.
Tax Payable Calculation for Comprehensive Income
| Bracket | Taxable Income (Tax Included) | Taxable Income (Tax Excluded) | Rate(%) | Quick Calculation Deduction |
|---|---|---|---|---|
| 1 | Not over CNY 3,000 | Not over CNY 2,910 | 3 | 0 |
| 2 | Over CNY 3,000 to 12,000 | Over CNY 2,910 to 11,010 | 10 | 210 |
| 3 | Over CNY 12,000 to 25,000 | Over CNY 11,010 to 21,410 | 20 | 1,410 |
| 4 | Over CNY 25,000 to 35,000 | Over CNY 21,410 to 28,910 | 25 | 2,660 |
| 5 | Over CNY 35,000 to 55,000 | Over CNY 28,910 to 42,910 | 30 | 4,410 |
| 6 | Over CNY 55,000 to 80,000 | Over CNY 42,910 to 59,160 | 35 | 7,160 |
| 7 | Over CNY 80,000 | Over CNY 59,160 | 45 | 15,160 |
Tax Payable Calculation for Business Operation Income
| Bracket | Taxable Income (Tax Included) | Taxable Income (Tax Excluded) | Rate(%) | Quick Calculation Deduction |
|---|---|---|---|---|
| 1 | Not over CNY 30,000 | Not over CNY 28,500 | 5 | 0 |
| 2 | Over CNY 30,000 to CNY 90,000 | Over CNY 28,500 to CNY 82,500 | 10 | 1,500 |
| 3 | Over CNY 90,000 to CNY 300,000 | Over CNY 82,500 to CNY 250,500 | 20 | 10,500 |
| 4 | Over CNY 300,000 to CNY 500,000 | Over CNY 250,500 to CNY 390,500 | 30 | 40,500 |
| 5 | Over CNY 500,000 | Over CNY 390,500 | 35 | 65,500 |
IIT Exemption Item
- Prizes in science, education, technology, culture, health, sports and environmental protection awarded by provincial people's governments, ministries and commissions under the State Council and units of the People's Liberation Army at or above the army level, as well as by foreign organizations and international organizations;
- Interest accruing from treasury bonds and financial bonds issued by the State;
- Subsidies and allowances distributed according to the unified regulations of the State;
- Welfare benefits, pensions for the disabled or for the family of the deceased and relief payment;
- Insurance compensation;
- Military severance pay, demobilization pay and discharge pay for military personnel;
- Settling-in allowance, severance pay, basic pensions or retirement payments or payments for veteran cadres, and living allowances and subsidies for retired veteran cadres distributed to cadres and workers according to the unified regulations of the State;
- Incomes of diplomatic representatives, consular officers and other personnel of foreign embassies and consulates in China, which, pursuant to the provisions of relevant laws, shall be exempt from tax;
- Incomes which shall be exempt from tax under the international conventions to which the Chinese Government is a member or agreements which the Chinese Government has signed; and
- Other income exempt from tax as stipulated by the State Council.
IIT Reduction Item
- Income paid to the disabled, the elderly living alone, and family members of martyrs; or
- Income paid to who suffers huge losses as a result of natural disaster.
- The State Council may specify other circumstances for tax reduction and require them to be submitted to the Standing Committee of the National People's Congress for record-filing.
Anti-Tax Avoidance Rule
Under any of the following circumstances, the tax authority shall have the right to make tax adjustments based on reasonable methods:- Business that is not carried out under the arm's length principle between an individual and his or her affiliated party results in the lower amount of the individual's or his or her affiliated party's taxable income, without any justifiable causes;
- An enterprise established in a country (region) where the actual tax is obviously lower, which is controlled by a resident individual or jointly controlled by a resident individual and a resident enterprise, does not distribute profits that belong to such resident individual or distributes such profits in a smaller amount, without reasonable business needs;
- An individual makes other arrangements, without justifiable business purposes, to seek unjustified tax benefits.
- Where it is required to make additional tax payments due to tax adjustments made by the tax authority in accordance with the provisions of the preceding paragraph, additional tax payments due shall be made, plus the interest thereon.
- You can click here for information about "FAQs of China Taxation"
Should you have any enquires about Individual Income Tax, please complete the form below and we will reply to you soon.
-
Professional Qualifications
Hong Kong Practicing CPA Firm
-
Certified Member
Member of HKTDC Advisory Committees
-
Corporate Social Responsibilities
CSR Award
-
Training and Development Achievement
Manpower Developer Award
