How To Calculate Salary Income Tax in China
Job
Source: Majdi
Calculating the income tax in China is never been a straightforward process. Most Chinese and foreign HR don't have clear idea how does the income tax calculation happen. So we made it simple. Here we go
Three simple steps
Let's say your monthly salary before tax is: RMB16,000
1) Calculate Your Taxable Income
For foreigners, RMB4,800 is a non-taxable income, this is a fixed amount for all salary levels (See Note 1). So let's deduct this non-taxable amount and deduct another 10% of the original salary, but no more than RMB2,000, which is the individual social contribution (For details refer to Q2 & Q3) :
RMB16,000 - RMB4,800 - (16,000 * 10%) = RMB9,600
RMB9,600 is called Taxable Income
2) Find Your Tax Bracket
Use the Taxable Income we got from above, RMB9,600, to find the relevant tax bracket form the below table. It's 25%, then:
RMB9,600 * 0.25 = RMB2,400
Don't worry, it's not over yet, go to next step
3) Reduce the Quick Deduction
Look at the last column in the above table called: "Quick Deduction". The amount for 25% tax rate is RMB1,005, so:
RMB2,400 - RMB1,005 = RMB1,395
RMB1,395 is the final amount to be deducted from your monthly salary as income tax.
More examples
(Monthly Salary : income Tax)
RMB 4,700: Is Tax fee.
RMB 8,000: - 4,800 -800 = 2,400 x 10% = 240 -105 = RMB 135
RMB 15,000: - 4,800 -1,500 = 8,700 x 20% = 1,740 -555 = RMB 1,185
RMB 22,000: - 4,800 -2,000 = 15,200 x 25% = 3,800 -1,005 = RMB 2,795
RMB 58,000: - 4,800 -2,000 = 51,200 x 30% = 15,360 -2,755 = RMB 12,605
RMB 85,000: - 4,800 -2,000 = 78,200 x 35% = 27,370 -5,505 = RMB 21,865
RMB 100,000: - 4,800 -2,000 = 93,200 x 45% = 41,940 -13,505 = RMB 28,435
Q & A
Q1: Is the non-taxable income for Chinese the same for foreigners of RMB4,800?
No.
For Chinese employees it's RMB3,500
Does the 10% deduction for individual social welfare differ between regions and companies?
Yes.
10% is just a rough average. Normally this could be from 8% to 15% depending on the company and regional policies for social contribution.
Your HR can tell you what's the exact % deducted from your salary for individual social contribution.
In Mandarin this is called 五险一金个人部分百分比, show this sentence to your HR to get the accurate %.
Why deducting the individual social welfare contribution has a limit of RMB2,000?
This limit differs between regions and cities in China. The RMB2,000 is just an average, it's not 100% accurate, it is for calculation simplicity. This number originates from what so called the "Average Monthly Social Salary" or (AMVS) in your region/city/county x 3. The AMVS changes yearly and varies between RMB4,000-RB8,000 between regions.
2017 AMVS in Shanghai = RMB6,503
2017 AMVS in Beijing = RMB7,086
2016 AMVS in Guangzhou = RMB6,764
Unfortunately there is no unified national list for the AMVS as this value keeps on changing upward. By multiplying the AMVS of your region x 3 and then x 10% you can get the exact number equals to the RMB2,000 in your city. In Shanghai it's RMB1950. Beijing RMB2125. Guangzhou RMB2029.
Is the this tax calculation applied for both full-time and part-time jobs?
Yes.
It's the same for full-time and part-time jobs, but not contractual jobs.
I used the above calculation, but the result is different from what my company deducts for salary tax?
Possible reason that your taxable salary in the company includes other allowances like: House, bonus, transportation, business trips...etc. According to company accounting policies such costs can be included in your salary, and then you need to add up all these expenses into your basic salary to do the calculation accordingly. These expenses might vary monthly, and then the individual income tax might vary monthly.
Another reason is that your applied individual social contribution is based on your last year's salary, so it's not your currently salary. We didn't include this factor in the main calculation for simplicity.
If you have any questions please write in the comment and don't forget to like this article.