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.

Income tax rates

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)
1,500	3	0
1,501 – 4,500	10	105
4,501 – 9,000	20	555
9,001 – 35,000	25	1,005
35,001 – 55,000	30	2,775
55,001 – 80,000	35	5,505
Over 80,000	45	13,505

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)
1,455	3	0
1,456 – 4,155	10	105
4,156 – 7,755	20	555
7,756 – 27,255	25	1,005
27,256 – 41,255	30	2,775
41,256 – 57,505	35	5,505
Over 57,505	45	13,505

Sample income tax calculation

If the individual is responsible for his/her own IIT
Monthly salary (before tax): $10,000
Exchange rate: 6.40

Taxable income

Tax payable

= 10,000 x 6.40 - 4,800
= 59,200
= 59,200 x 35% - 5,505
= 15,215

If IIT is borne by the employer
Monthly salary (after tax): $10,000
Exchange rate: 6.40

Net income

Tax payable

= 10,000 x 6.40
= 64,000
= (64,000 - 4,800 - 13,505) x 45% - 13,505
1 - 45%
= 23,882

Information about China:

tax planning opportunities

Last updated 18 August 2011

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.

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