Disclaimer: Tax in China is like many other things. It is a blur concept, and confusing most of time. I am not a professional on this. To be honest, if I were not to prepare this article, I never really understand or try to understand how tax works. So there may be error or misunderstanding in this document. Refer to official document instead of this person.
Personal Income Tax
The current income tax was deducted before you get your salary. The company is responsible to charge you tax on your behalf.
The formula is
$$$ due to tax = your monthly salary – basic tax waive $ – personal social insurances etc
* basic tax waive $ is typically from 800 RMB to 1600 RMB depending on the province/city you are in. That means, if your salary is lower than this amount, you don’t have to pay tax.
* personal social insurances are different kinds of insurance you pay to the government, like housing allowance, retirement insurance, medical insurances, unemployment insurance. To be short, there are many insurances that you need to pay the government. For the company, they also need to pay the company’s portion of the same insurance for you, which is typically 45-48% of your salary.
Tax = $$$ due to tax * Tax Percentage – Easy Deduction Rate
* Easy Deduction Rate: It is just for easiness of calculation. For example, if you way a rate of 25%, there is a portion (below 20,000) that is due to lower rate (20%, 15%, 10% and 5%), so you don’t need to pay as much as 25% of the full amount, so you deduct the Easy Deduction Rate.
Grade | Monthly Salary (RMB) | Tax Percentage | Easy Deduction Rate
1 | $ < 500 | 5% | 0 2 | 500 < $ < 2,000 | 10% | 25 3 | 2,000 < $ < 5,000 | 15% | 125 4 | 5,000 < $ < 20,000 | 20% | 375 5 | 20,000 < $ < 40,000 | 25% | 1375 6 | 40,000 < $ < 60,000 | 30% | 3375 7 | 60,000 < $ < 80,000 | 35% | 6375 8 | 80,000 < $ < 100,000 | 40% | 10375 9 | $ > 100,000 | 45% | 15375
When you buy goods, you are paying consuming tax, but it is included in the final price everywhere. You have no idea about that you are actually paying tax.
Self-claim tax for annual salary > 120K
There is a new policy that people with income > 120K will need to claim tax by themselves. I never really understand what it means. Let’s wait and see how it works.