China’s Individual Income Tax Amendments Come Into Effect Sept 1

New revisions to China’s Individual Income Tax (IIT) Law increased the amount of monthly deductible income for Chinese nationals to RMB3,500, the deductible income for foreign remains the same at RMB 4,800. The earlier proposed increase was up to RMB 3,000.

The amended IIT Law passed by the Standing Committee of the National People’s Congress (“NPC”) will take effect on September 1, 2011.

Revisions made to the IIT Law include:

• IIT on income from salaries is subject to progressive tax rates ranging from 3 percent to 45 percent;
• For Chinese nationals, the amount of taxable income from salaries equals the amount that is left after deducting RMB3,500 from one’s monthly salary;
• The NPC has removed the 15 and 40 percent tax brackets;
• The NPC has also reduced the IIT rate levels from nine to seven percent;
• The IIT filing period has been extended from 7 days to 15 days in the following month

Under the new IT tax computation, individuals whose gross monthly income (net of social insurance) is RMB12,000 will receive a maximum tax cut of RMB480, and individuals whose gross monthly income (net of social insurance) is above RMB110,000 will see the largest increase in taxes of RMB1,195.

Effectively, Chinese nationals whose gross monthly income is below RMB38600 will begin paying lesser taxes while individuals with gross monthly incomes above RMB38,600 will pay higher taxes.

Payroll for all China employees will need to reflect the new calculation method at the end of September. The tax filing due date for September payroll is on 15 October 2011.

Corporate Tax Rates

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Disclaimer :

Published: August 11, 2011. The information provided on this page is intended merely to highlight issues for general information purposes only. It is not comprehensive nor does it provide legal advice. Any information is subject to change without notice. No liability whatsoever is accepted by Nair & Co.