Individual income Tax is levied on the incomes derived from sources both inside and outside China of individuals who have domicile in China, or although without domicile have resided for one year or more in China; and on the incomes derived from sources within China of individuals not domiciled or resident in China, or individuals not domiciled but have resided in China for less than one year.
(a) Taxpayer and Tax Liability
- Resident taxpayers refer to Chinese citizens and foreign nationals residing in China. They are individuals domiciled in China (who, by reason of their permanent registered address, family or economic interests, habitually reside in China); or foreign nationals, overseas Chinese, and Hong Kong, Macau and Taiwan compatriots who have resided in China for a calendar year in a tax year. Resident taxpayers have unlimited tax liabilities and have to pay individual income tax to the Chinese government on incomes from global sources.
- Non-resident taxpayers refer to foreign nationals, overseas Chinese and Hong Kong, Macau and Taiwan compatriots who are neither domiciled nor resident in China; or foreign nationals, overseas Chinese and Hong Kong, Macau and Taiwan compatriots who are not domiciled in China and have resided in China for less than a calendar year in a tax year. Non-resident taxpayers have limited tax liabilities and are required to pay individual income tax to the Chinese government only on incomes from sources inside China.
(b) Taxable Items, Tax Rates and Deduction Standards
- Income from wages and salaries
Income from wages and salaries is taxed at progressive rates ranging from 5% to 45%.
Level
Monthly Taxable Income
(Rmb)Tax Rate
Allowable Deduction
(Rmb)1
500 or less 5%
0
2
Portion from 500 to 2,000 10%
25
3
Portion from 2,000 to 5,000 15%
125
4
Portion from 5,000 to 20,000 20%
375
5
Portion from 20,000 to 40,000 25%
1,375
6
Portion from 40,000 to 60,000 30%
3,375
7
Portion from 60,000 to 80,000 35%
6,375
8
Portion from 80,000 to 100,000 40%
10,375
9
Portion from 100,000 upwards 45%
15,375
Taxable income: In accordance with the revised regulations on individual income tax, starting from 1 March 2008, taxpayers are required to pay individual income tax on their actual wages and salaries with a monthly allowance of Rmb2,000.
Method of computation: Monthly tax payable = monthly taxable income x applicable tax rate - allowable deduction
- Income from remuneration for labour service
Income from the remuneration for labour service is taxable on each payment, where proportional tax rate at 20% applies. For remuneration in a single payment in excess of Rmb20,000, extra tax will be levied. For the part of taxable income exceeding Rmb20,000 but less than Rmb50,000, after calculating the tax payable, an additional 50% on the tax payable will be levied; and for the part exceeding Rmb50,000, an additional 100% on the tax payable will be levied.
- Income from author's remuneration
Income from author's remuneration is taxable on each payment for every publication or release. For remuneration received in each payment of less than Rmb4,000, a deduction of Rmb800 is allowed for expenses. For each payment of Rmb4,000 or more, a deduction of 20% is allowed for expenses and the remaining amount is the taxable income. Tax payable is computed at a rate of 20%, with a further deduction of 30% on the amount of tax payable.
Taxable income = income from taxable item - Rmb800 (or income from taxable item x 20%)
Tax payable = taxable income x 20% x (1 - 30%)
- Income from royalties and property leasing
Such income is taxable on each payment. For remuneration received in each payment of less than Rmb4,000, a deduction of Rmb800 is allowed for expenses. For each payment of Rmb4,000 or more, a deduction of 20% is allowed for expenses. The remaining amount will be taxed at 20%.
Taxable income = income from taxable item - Rmb800 (or income from taxable item x 20%)
Tax payable = taxable income x 20% - Income from transfer of property
Income from the transfer of property is taxed at a rate of 20%.
Taxable income = income from transfer of property - original value of property - reasonable expenses
Tax payable = taxable income x 20% - Income from interest, dividends and bonuses, contingent income and other income
The applicable tax rate is 20%.
Tax payable = income from each payment x 20%
- Income from interest on savings deposits
Income from interest accrued before 31 October 1999 is not subject to individual income tax; income from interest on savings deposits accrued from 1 November 1999 to 14 August 2007 is taxed at the proportional rate of 20%; income from interest on savings deposits accrued after 15 August 2007 is taxed at the proportional rate of 5%.
For individuals of foreign nationality and individuals who are residents of Hong Kong, Macau or Taiwan receiving income from interest on savings deposits within the territory of China, where the tax rate stipulated in the tax agreement signed between their resident country (or region) and the Chinese mainland (including the tax arrangements signed between the Mainland and the Hong Kong Special Administrative Region and the Macau Special Administrative Region respectively) is lower than that stipulated in China's laws and regulations, they may enjoy the benefits of the agreement, provided that they submit application for the enjoyment of such tax agreement benefits. Where the tax rate in the agreement is higher than that stipulated in China's laws and regulations, they may be taxed at the rate stipulated in China's laws and regulations. The applicable tax rate for income from interest in the current tax arrangement with the Hong Kong Special Administrative Region is 7%.
(c) Filing of Tax Returns
Tax returns may be filed by taxpayers themselves or by withholding agents.