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  • Personal Tax

    AT A GLANCE

    OUR JURISDICTIONS —

    Personal Tax

    LAST UPDATED 11/01/2024

    AT A GLANCE

    Overview of personal taxes

    In China, residents are typically taxed on their income from all over the world. However, non-residents are usually taxed only on their income earned in China. There are nine categories of income in China, each with its own tax rate, allowable deductions, and other details.

    For residents, employment income, remuneration for labour services, author’s remuneration, and royalties are grouped together as “comprehensive income” for tax calculation purposes on an annual basis.

    Income from the other categories is taxed separately by category on a monthly or transaction basis. Non-residents, on the other hand, are taxed separately on income from each of the nine categories on a monthly or transaction basis.

    There are different tax rates for different income categories. For residents, the tax rate for comprehensive income is based on a progressive tax rate, which means that the tax rate increases as the income increases. For non-residents, the tax rate is also progressive and varies according to the monthly taxable income.

    Income earned by individuals from privately-owned businesses, sole proprietorship enterprises, or partnerships is generally subject to IIT at progressive rates ranging from 5% to 35%. There is also a flat tax rate of 20% that applies to incidental income, rental income, interest income, dividends, and capital gains unless specifically reduced by the State Council.

    Finally, it is important to note that there are no local taxes on personal income in China.

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    Personal tax residence

    General

    In China, individuals who are domiciled in China or who reside in China for 183 days or more in a tax year are generally considered residents for IIT purposes and are subject to IIT on their worldwide income. Non-China-domiciled individuals who reside in China for less than 183 days in a tax year are generally considered non-residents for IIT purposes and are subject to IIT on their China-source income only.

    Foreign individuals and residents of Hong Kong, Macau, and Taiwan are generally taxed based on their physical presence in China. Foreign individuals who reside in China for less than 183 days are taxed only on their China-source income.

    Foreign individuals who reside in China for 183 days or more in a tax year but not more than six consecutive years are subject to tax on both their China-source income and their foreign-source income.

    If they reside in China for 183 days or more per year for over six consecutive years, they will be subject to IIT on their worldwide income from the seventh consecutive year onward.

    However, as a concession, foreign-source income is taxed only to the extent of income paid and/or borne by a China entity or individual.

     

    China source income

    The following categories of income are considered China-source income, regardless of whether the payments are made within China or not:

    • income derived from employment or contracted labor services performed within the territory of China,
    • rental income in relation to property used within the territory of China,
    • income derived from the transfer of real property located within China or other property transfer transactions incurred within the territory of China,
    • income derived through the grant of various franchises to be used within the territory of China,
    • interest and dividend income paid by companies,
    • enterprises, other organizations, or resident individuals within the territory of China, author’s remuneration paid or borne by companies, enterprises, or other organizations within the territory of China, incidental income paid or borne by companies, organizations, or resident individuals within the territory of China,
    • business income derived from business activities performed within the territory of China, and
    • income from transfer of equity in a foreign entity if, at any time during the three-year period prior to the transfer, more than 50% of the fair value of the assets of the invested foreign entity is derived directly or indirectly from immovable properties located within the territory of China.

    Types of personal income and gains in China

    When it comes to determining an individual’s income in China, there are nine categories that all types of income must be grouped under.

    Employment income, which includes wages, bonuses, and benefits, is taxable, except for business-related expense reimbursements and certain non-taxable fringe benefits.

    Chinese social security contributions made by the employer are not taxable for Individual Income Tax (IIT) purposes, but overseas social security contributions are subject to IIT.

    Statutory pension income received after retirement is tax-exempt.

    Income from equity compensation plans is generally considered employment income, but may be eligible for favorable tax calculation treatment.

    Labour service income refers to independent services such as consulting or medical practice. Business income earned from privately-owned businesses, sole proprietorship enterprises, and partnership enterprises are taxed at the individual level, and qualified expenses and costs are deductible.

    Income from property transfers, dividends, interest, rental properties, and intellectual property (IP) are also taxable.

    Income from IP includes royalties, which are subject to progressive tax rates of 3% to 45%, and income from the transfer of IP, which is considered capital gain and subject to a flat tax rate of 20%.

    Author’s remuneration is subject to progressive tax rates.

    Certain income derived by foreign individuals in relation to IP may not be taxable in China, depending on their physical presence in China and the source of the income.

    Social security contributions

    In China, people who work there have to pay money into social security funds. This includes things like pensions, medical care, unemployment benefits, and compensation for work-related injuries.

    Since 2011, foreign workers in China also have to pay into these funds if they have a work permit. The amount people have to pay varies depending on where they work, and there are different rates for employees and employers.

    There are limits on how much money people have to pay into the funds each month. The limits change from year to year, and they also vary depending on the region people work in. Employers are responsible for taking the money out of their employees’ paychecks and sending it to the government each month.

    China has agreements with 11 other countries to help people who move between these countries. People who come from these countries may be able to get out of paying some social security contributions in China, depending on the agreement.

    These agreements cover things like pensions and unemployment insurance. One agreement with France has been signed but is not yet in effect.

    VAT for individuals

    Value-added tax, or VAT, is a tax that applies to individuals who sell or import goods, provide services, or sell intangible or immovable properties. For those who are registered as general VAT payers, they can claim back VAT that they have paid on their purchases against the VAT they owe on their sales. The applicable VAT rates vary depending on the industry and type of goods or services provided.

    Small-scale VAT payers usually have a VAT rate of 3%, but may be exempt from VAT if their income falls below certain thresholds set by the provincial tax bureaus. Unlike general VAT payers, small-scale VAT payers are not allowed to claim back VAT they have paid on their purchases.

    In response to the COVID-19 pandemic, there have been VAT incentives introduced since 2020, such as a temporary reduction in the VAT rate for small-scale VAT payers from 3% to 1%, and a temporary exemption from VAT for small-scale VAT payers until the end of 2022.

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    Net wealth & Inheritance Taxes

    Net wealth/worth taxes

    There are no net wealth/worth taxes in China.

     

    Inheritance, estate, and gift taxes

    At present, there are no inheritance, estate, or gift taxes in China.

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    Personal property taxes in China

    In China, there are three main types of personal property taxes:

    • real estate tax,
    • urban and township land-use tax, and
    • land appreciation tax.

    Real estate tax is a yearly tax based on the value of real properties or rental income received. It applies to land and real properties used for business purposes or leased. The tax rate is 1.2% of the original property value or 12% of the rental value, but local governments may offer a tax reduction of 10% to 30%. If a property is not used for business purposes or rented out, individuals are exempt from real estate tax.

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    Urban and township land-use tax is assessed on taxpayers, including individuals, who use land within city, country, township, and mining districts. It is calculated annually based on the space actually occupied by the taxpayer multiplied by a fixed amount per square meter determined by local governments. In many provinces and cities, individuals are exempt from urban and township land-use tax for holding residential properties.

    The land appreciation tax applies to the gain from the disposal of land-use rights or real estate properties at progressive rates ranging from 30% to 60%. However, individuals are exempt from land appreciation tax when selling residential properties

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    Other personal taxes in China

    Consumption tax

    Consumption tax is a tax on specific luxury goods and environmentally harmful goods such as cigarettes, alcoholic beverages, high-end cosmetics, jewelry, gasoline, automobiles, battery, and coating. The amount of tax payable depends on the sales amount or sales volume of the goods.

    Urban and township land-use tax

    Urban and township land-use tax is a tax levied on individuals who use land in the city, county, township, and mining districts. It is calculated annually based on the area occupied by the taxpayer multiplied by a fixed amount per square meter. Individuals are usually exempt from urban and township land-use tax for holding residential properties.

    A deed tax is a tax applied to the purchase or sale of land use rights or real properties. The rate usually ranges from 3% to 5%. The transferee or assignee is the taxpayer.

    Stamp tax

    Stamp tax is a tax applied to individuals who conclude taxable documents or conduct securities trading in China. The tax rates vary from 0.005% to 0.1%, depending on the type of contract.

    Motor vehicle acquisition tax

    Motor vehicle acquisition tax is a tax of 10% of the taxable consideration applied to the purchase, import, self-production, receipt as a gift, or award of an automobile, tramcar, trailer, or motorcycle with a gas displacement of over 150 milliliters within China.

    Vehicle and vessel tax

    Vehicle and vessel tax is a tax levied annually on all vehicles and vessels in China. Transport vehicles are taxed according to their own weight, while passenger cars, buses, and motorcycles are taxed on a fixed unit amount. Vessels are taxed based on their deadweight tonnage.

    Real estate tax

    Real estate tax is based on the value of real property or rental received and is imposed annually on land and real properties used for business purposes or leased.

    Individuals are exempt from real estate tax if the property is not used for business purposes or rented out.

    Customs duties

    Customs duties are levied on goods that are allowed to be imported into or exported out of China based on relevant customs regulations. The consignee of imported goods, consignor of export goods, and owner of entry articles are liable for paying customs duties.

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    However, the Curator has additional responsibilities. They are tasked with the responsibility of managing and updating one of the jurisdiction pages.

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    The Curator is a fully-fledged member of the Tax Natives team. As such, they are capable of making introductions to other Tax Natives and are also able to take leads from their fellow Natives.

    However, the Curator has additional responsibilities. They are tasked with the responsibility of managing and updating one of the jurisdiction pages.

    There is only one Curator membership available for each jurisdiction.

    Where a Curator fulfils their commitments then they receive a 100% discount against their monthly membership fee.

    Initial admin fee £250 Free
    Minimum membership term 12 months
    Article contentCreator and Curators must create at least one piece of original, quality-approved content each quarter.
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    The Creator is a fully-fledged member of the Tax Natives team. As such, they are capable of making introductions to other Tax Natives and are also able to take leads from their fellow Natives.

    However, the Creator has additional responsibilities. They commit to their other Natives that they will produce at least one piece of quality content each quarter – whether an article, video or other valuable content.

    There are multiple Creator memberships available for each jurisdiction. Where a Curator fulfils their commitments then they receive a 100% discount against their monthly membership fee.

    Initial admin fee £250 Free
    Minimum membership term 12 months
    Content creationCreator and Curators must create at least one piece of original, quality-approved content each quarter.
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    Managing and updating your jurisdiction page No

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    The Adviser Native is a care-free soul and has made no other commitments to his fellow Tax Natives to generate content or curate a jurisdictional page.

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    Initial admin fee £250 Free
    Minimum membership term 12 months
    Content creationCreator and Curators must create at least one piece of original, quality-approved content each quarter.
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    Managing and updating your jurisdiction page No

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