Expatriate tax ebook - China
Facts and figures
Pre arrival procedures
Employment visas
Tax year
Tax returns and compliance
Income tax rates
Sample income tax calculation
Pre arrival procedures
Expatriates who require a work visa (a "Z" visa) must apply for this before taking up employment in China. It is, therefore, important that the expatriate’s employment contract and benefit package is structured tax efficiently before the contract is submitted to the immigration authorities.
Employment visas
Expatriates taking up employment in China must apply for an employment visa before starting work. When granting visas, the immigration authorities place great emphasis on the education level, skills of the employee and the economic benefits to China that will flow from the expatriate’s employment.
If the expatriate’s spouse and dependent family relocate to China they will require dependent visas. Spouses entering China on dependent visas are not normally allowed to take up employment in China and must apply for a separate employment visa if they wish to work in China.
Tax year
The tax year is the calendar year. Individual Income Tax (IIT) is assessed on a monthly basis. In addition, most expatriates should file an annual tax return by 31 March.
Tax returns and compliance
Expatriates should register with the Chinese tax authorities as soon as they become liable to IIT or if they have reason to believe that the duration of their stay in China will render them liable to IIT. An employer is obliged to act as a "tax withholding agent" and is generally responsible for remitting tax payments to the tax authorities on behalf of the employees within seven days after the end of each month.
Tax penalties can be severe in China. An overdue tax surcharge is imposed on a daily basis at the rate of 0.05% of the amount of overdue tax, commencing on the first day the tax payment is in default. Depending on the reason for non¬payment or underpayment of taxes, the tax authorities may impose a penalty of between 50% and 500% of the amount of tax unpaid or underpaid. In serious cases, a taxpayer could be prosecuted for criminal liability.
If the individual is responsible for his/her own IIT
Monthly IIT = Taxable Income x Tax Rate – QRD
| Monthly taxable income after deductions(RMB) | IIT(%) | Quick reckon deduction (RMB) |
|---|---|---|
| 500 | 5 | 0 |
| 501 – 2,000 | 10 | 25 |
| 2,001 – 5,000 | 15 | 125 |
| 5,001 – 20,000 | 20 | 375 |
| 20,001 – 40,000 | 25 | 1,375 |
| 40,001 – 60,000 | 30 | 3,375 |
| 60,001 – 80,000 | 35 | 6,375 |
| 80,001 – 100,000 | 40 | 10,375 |
| Over 100,000 | 45 | 15,375 |
If IIT is borne by the employer
Monthly IIT = (Taxable income-QRD) x Tax Rate – QRD
1 – Tax Rate
| Tax borne case net income (RMB) | IIT(%) | Quick reckon deduction(RMB) |
|---|---|---|
| 475 | 5 | 0 |
| 476 – 1,825 | 10 | 25 |
| 1,826 – 4,375 | 15 | 125 |
| 4,376 – 16,375 | 20 | 375 |
| 16,376 – 31,375 | 25 | 1,375 |
| 31,376 – 45,375 | 30 | 3,375 |
| 45,376 – 58,375 | 35 | 6,375 |
| 58,376 – 70,375 | 40 | 10,375 |
| Over 70,375 | 45 | 15,375 |
Sample income tax calculation
If the individual is responsible for his/her own IIT
Monthly salary (before tax): $10,000
Exchange rate: 7.45
|
Taxable income Tax payable |
= 10,000 x 7.45 - 4,800 = 69,700 = 69,700 x 35% - 6,375 = 18,020 |
If IIT is borne by the employer
Monthly salary (after tax): $10,000
Exchange rate: 7.45
|
Net income Tax payable |
= 10,000 x 7.45 - 4,800 = 69,700 = (69,700 - 10,375) x 40% - 10,375 1 - 40% = 29,175 |
Information about China:
Last updated 6 May 2008
This information has been provided by Grant Thornton China, a member firm within Grant Thornton International Ltd and is for informational purposes only. Neither Grant Thornton China or Grant Thornton International Ltd can guarantee the accuracy, timeliness or completeness of the data contained herein. As such, you should not act on the information without first seeking professional tax advice.
Disclaimer
Contact us
For further information on expatriate tax services in mainland China, please contact Wilfred Chiu.