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Tax system in Beijing


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The government agency in charge of tax policy is the Ministry of Finance. The State Administration of Taxation is the ministry-level department which is the functional department in charge of the State revenue work.

Under the current tax system in China, there are 26 types of taxes. They fall into 8 broad categories.

  • Turnover Taxes - Includes Value-Added Tax, Consumption Tax and Business Tax. The levy of these taxes are normally based on the volume of turnover or sales of the taxpayers in the manufacturing, circulation or service sectors.
  • Income Taxes - This includes Enterprise Income Tax, Foreign Investment Enterprise and Foreign Enterprise Income Tax ("FEIT"), and Individual Income Tax. These taxes are levied on the basis of the profits gained by producers or dealers, or the income earned by individuals. These are generally progressive, starting at 5% rising to 45%.
  • Resource Taxes - This consists of Resource Tax and Urban and Township Land Use Tax. These taxes reflect the chargeable use of state-owned natural resources, and aim to adjust the different profits derived by taxpayers who have access to different availability of natural resources.
  • Taxes for Special Purposes - These taxes are City Maintenance and Construction Tax, Farmland Occupation Tax, Fixed Asset Investment Orientation Regulation Tax, Land Appreciation Tax, and Vehicle Acquisition Tax. These taxes are levied on specific items for special regulative purposes.
  • Property Taxes - This encompasses House Property Tax, Urban Real Estate Tax, and Inheritance Tax
  • Behavioral Taxes - This includes Vehicle and Vessel Usage Tax, Vehicle and Vessel Usage License Plate Tax, Stamp Tax, Deed Tax, Securities Exchange Tax, Slaughter Tax and Banquet Tax. These taxes are levied on specified behavior.
  • Agricultural Taxes - Taxes belonging to this category are Agriculture Tax (including Agricultural Specialty Tax) and Animal Husbandry Tax which are levied on the enterprises, units and/or individuals receiving income from agriculture and animal husbandry activities.
  • Customs Duties - Customs duties are imposed on the goods and articles imported into and exported out of the territory of the People's Republic of China, including Excise Tax.

Refer to the Beijing Tax Bureau for complete information on rates.

Individual Tax

Any individual who has domicile in China or has resided in China for one year or more shall pay Individual Income Tax on their worldwide income. Any individual who is neither domiciled nor resident in China or who has resided in China for less than one year, shall pay Individual Income Tax on the income from sources inside China.

Wages and salaries are taxed on the basis of the balance of taxpayer' s monthly wages and salaries after lump-sum deduction of expenses.

    Monthly Individual Income Tax Rates Schedule:
  • Income of 500 RMB or less: 5 percent tax rate
  • Income in excess of 500 to 2,000 RMB: 10 percent tax rate, No deduction
  • Income in excess of 2,000 to 5,000 RMB: 15 percent tax rate, 25 deduction
  • Income in excess of 5,000 to 20,000 RMB: 20 percent tax rate
  • Income in excess of 20,000 to 40,000 RMB: 25 percent tax rate
  • Income in excess of 40,000 to 60,000 RMB: 30 percent tax rate
  • Income in excess of 60,000 to 80,000 RMB: 35 percent tax rate
  • Income in excess of 80,000 to 100,000 RMB: 40 percent tax rate
  • Income in excess of 100,000 RMB: 45 percent tax rate

The formula for computing the amount of tax payable is:
Monthly taxable income = Monthly aggregate wages/salaries - 800 RMB
Monthly amount of tax payable = Monthly taxable income × Applicable rate - Quick deduction

Deductions

An employer is obligated to deduct tax at source on a monthly basis from a salaried employee and to make additional contributions to social security. This is to contribute to social security. The rates for the basic pension are 20 percent for the employer and 7 percent for the employee.

    Other deductions:
  • Dividend - 10 percent
  • Interest - 10 percent, (plus 5 percent business tax)
  • Royalties -10 percent, (plus 5 percent business tax)
  • Capital gains -10 percent

VAT

Value Added Tax applies to any enterprise, unit and other individual engaged in sales of goods, importation of goods, provision of services of processing, repairs and replacement within the territory of the People's Republic of China. The standard rate of VAT in China is 17 percent. There is a reduced rate of 13 percent that applies to agriculture, forestry, products of animal husbandry, aquatic products; Edible vegetable oil and food grains duplicates; Tap water, heating, cooling, hot air supplying, hot water, coal gas, liquefied petroleum gas, natural gas, methane gas, coal/charcoal products for household use; Books, newspapers, magazines (excluding the newspapers and magazines distributed by the post department); Feeds, chemical fertilizers, agricultural chemicals.

Exporters are entitled to V.A.T. refund for materials bought in China.

The formula for computing the tax payable is as follows:
Tax payable = Output tax payable for the current period - Input tax for the current period
Output tax payable = Sales volume in the current period × Applicable tax rate

Reporting

The tax year in China ends on December 31st. It is compulsory to file a report and pay advances monthly or quarterly (monthly for individuals). The date for submitting an annual report and arranging payments is up until May 31st. There are fines for late payments.

An individual whose entire income in China is from a salary or whose income is subject to a deduction of tax at source is exempt from submitting an annual report. An employer is obligated to submit a monthly report on his employee's wages and to pay the tax deducted within 7 days of the end of the previous month.

Most large international firms take care of their employee's taxes. They quote employees the salary after tax and handle the paperwork themselves.

For self tax-declaration, the State Administration of Taxation collects and administers.

Reciprocal Tax Agreements

Some countries have reciprocal tax agreements, and others may require you to pay some form of taxes both in your home country and aboard. Most National Tax Administrations are an excellent resource for exactly what steps to take when paying taxes abroad. Check to find out if your country has a

Reciprocal Tax Agreements.

Update 12/05/2011



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