Individuals working in China – both Chinese and foreign – are required to pay individual income tax (IIT) on their earnings.
Chinese citizens must pay IIT on all income sourced both domestically and overseas (unless stipulated otherwise in a tax treaty), while in most cases foreigners are only required to pay IIT on income derived in China.
IIT in China is levied at a progressive rate, ranging from three percent for monthly taxable incomes of RMB 1,500 (US$240) or less, to 45 percent for taxable incomes greater than RMB 80,000 (US$12,725). A complete breakdown of IIT rates in China can be found here.
In addition to IIT, employers and employees in China generally must contribute social insurance payments. In some jurisdictions, foreign employees can opt out of social insurance payments, such as in Shanghai.
IIT and social insurance payments are usually withheld by employers and paid to tax authorities on a monthly basis. However, employees are advised to calculate their IIT and social insurance obligations to gain a clear understanding of their salary packages and ensure that they are being paid the correct amount.
The International Payroll and Human Resources team at Dezan Shira & Associates has developed a simple calculator to help employers and employees calculate their monthly IIT and social insurance obligations.
While this calculator is based on publicly available information and tax laws, and was verified by China-based HR and tax professionals, we note this calculator should be used for research purposes only. The calculator does not guarantee the accurate calculation of IIT and social insurance obligations. Further, we note that social insurance contributions are subject to annual reforms; the payment base is calculated from the previous years’ annual salary and the payment rate could be revised. Individuals and employers are advised to contact HR professionals for further information regarding IIT and social insurance payments.
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Dezan Shira & Associates is a full service practice in China, providing business intelligence, due diligence, legal, tax, accounting, IT, HR, payroll, and advisory services throughout the China and Asian region. For assistance with China business issues or investments into China, please contact us at firstname.lastname@example.org or visit us at www.dezshira.com
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