Income Tax for Foreigners in China

Personal income tax calculation for foreigners in China changed in 2011. Expats and halfpats in China can refer to the following table and work out the amount of taxes you’ll be deducted monthly.

Tax Rate Chart (translated from this article from Shanghai Tax Bureau)

Income Tax for Foreigners in China

Income Tax for Foreigners in China

Taxable Income = ( Total Income – Initial Deduction* – Tax Deductible Allowance** )
Tax Payable = ( Taxable Income x Tax Rate ) – Deduction

* Initial deduction is RMB 3,500 for PRC residents and 4,800 for foreigners. (taken from this other article from Shanghai Tax Bureau)
** Tax Deductible Allowance includes rental, food and travel expenses, etc. as determined by your company’s Finance/HR department. You will need to get fapiao (发票) (official invoices) for these figures to qualify as your Tax Deductible Allowance.

Tax Examples
Example 1: Gross Salary of 10K RMB/month
Gross Salary = 10,000
Taxable Income = 10,000 – 4,800 = 5,200
Tax Rate = 20%
Deduction = 555
Tax = 5,200 * .2 –555 = 485 RMB

Example 2: Gross Salary of 10K RMB/month, Tax Deductible Allowance of 2,000 RMB/month

Gross Salary = 10,000
Tax Deductible Allowance = 2,000
Taxable Income = 10,000 – 4,800 – 2,000 = 3,200
Tax Rate = 10%
Deduction = 105
Tax = 3,200 * .1 –105 = 215 RMB

Example 3: Gross Salary of 30K RMB/month
Gross Salary = 30,000
Taxable Income = 30,000 – 4,800 = 25,200
Tax Rate = 25%
Deduction = 1,005
Tax = 25,200 * .25 –1,005 = 5,295 RMB

Example 4: Gross Salary of 30K RMB/month, Tax Deductible Allowance of 15K
Salary = 30,000
Tax Reimbursable Expenses = 15,000
Taxable Income = 30,000 – 4,800 –15,000 = 10,200
Tax Rate = 25%
Deduction = 1,005
Tax = 10,200 * .25 – 1,005 = 1,545 RMB

Naturally, the more your tax deductible allowance, the lower your taxable income and the lesser taxes you pay. So be sure you work out your sums thoroughly before negotiating your next raise or paycheck!

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10 Comments

  1. M Stanga - 11 August 2012

    What are some tax deduct. items in China?  I have worked in China for more than 5 years

  2. Shanghai Halfpat - 11 August 2012

    Rent, Meal allowance, etc. Anything you can get fapiao from. But it’s best to check with your company’s accounting department.

  3. Dr Long - 26 February 2013

    Are the calculations above based on an individual’s salary or couple’s? My wife and I both teach and have a monthly salary of 7000 yuan (school provides apartment). I can calculate our tax three ways

    1. As individuals, each of our tax would be (7000-4800)*.10 – 105 = 115, or 230 yuan for both/month

    Calculation by couple – two assumptions used
    2. We earn 14000 yuan/month so our tax bracket would be 25% but there is a deductible amount. According to the article, our tax would be (14000-4800)*.25-1005 = 1295 yuan total/month if we have a single deduction of 4800 for both of us.

    3.However, it is unclear if the deductible amount would be 4800 for the couple or it’s that amount per individual. If the latter, we would be in the 20% bracket and our tax would be (14000-9600)*.20-555 = 325 yuan total/month.

    As you can see, the differences are quite large. And, in fact, the amount they take out (total) is more than any of these but I suspect that includes local taxes as well as social security and perhaps other line items.

    Can you clarify the calculations for couples versus individuals?

  4. Dr Long - 26 February 2013

    I have also been told that the amount of tax taken out is greater if they pay you in cash (as our current employer does) versus direct deposit (and the difference can be substantial). Is this something you have heard as well? (Doesn’t make sense to me, but then, a lot of things over here don’t make sense to me.)

  5. Santi - 8 April 2013

    Individual income taxation applies……..

  6. Jack - 18 April 2013

    Hi I just found this forum and wanted aks a few questions for getting wheels in China and how it affects the income tax.

    1. If I buy a car here in China can I deduct the purchase price from my taxable income? If so how is it set of against my taxable income? (Once a year, monthly, ….)

    2. I read that you can deduct car renting costs from the taxable income. Is that true? (So if I cannot buy a car, then I could rent one and still reduce my taxable income)

    3. What about running expenses for a car (gas, insurance, repairing,….)?

    I take for granted that my accounting department will accept this if it is deductible by law.

    Many thanks in advance!

    Jack

  7. How to teach English in China: Income Tax | How to Teach English in China - 9 May 2013

    […] Update:  For more up to date information, as of May 2013, please see this post by Shanghai Halfpat:  http://www.shanghaihalfpat.com/income-tax-for-foreigners-in-china/ […]

  8. sk - 25 May 2013

    yes, individual income tax apply…

  9. JH - 10 September 2013

    Hi. My company’s accounting department says that they do not have an allowance. When you say “allowance,” do you mean allowance from the government to lower taxable income, or a monthly allowance the company offers to pay for such expenses. I have tried submitting fapiaos to them to lower my tax rate, they were, however rejected.

  10. Shanghai Halfpat - 11 September 2013

    I was referring to monthly allowance the company offers, and of course this is subjected to an agreement between you and the company. Rent, for instance, can be deemed as allowance as long as you provide fapiao.

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