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China’s expat tax system: who pays and how does it work?

The expat community in China is constantly growing, owing to the country’s position in the global economy. According to the seventh national population census, the number of foreigners living in China for three or more months increased over the decade to 845,697 (from 593,832). However, Beijing’s plans to reform tax exemptions on foreign employee allowances in the future have promoted overseas businesses to consider moving all or some of their businesses out of China.

If you are wondering what taxes in China look like in 2022 for foreigners, you’ve come to the right place. This Pacific Prime China article will help you understand the tax rates and benefits for expats in the Middle Kingdom.

Who needs to pay taxes in China?

Expats who stayed in the mainland or lived in the country for 183 days or more in a tax year will be considered tax-paying residents. However, global income will be taxed only after residing in the country for six years without leaving for longer than 30 days. On the other hand, non-residents (individuals who have resided in China for less than 183 days in a tax year) pay taxes only on the income earned in the Middle Kingdom.

Foreign experts, people working in the United Nations (or those working on UN aid projects), and people working under bilateral cultural and educational exchange programs are exempt from taxation.

Different kinds of income that can be taxed in China

The individual income tax (IIT) is pertinent to different jobs and respective sources of income. Here is a list of notable income sources that are taxable in China:

  • Salaries
  • Author’s remuneration
  • Personal service payments
  • Income from royalties
  • Business operations
  • Bonus payouts
  • Interests and dividends
  • Revenue from renting a property
  • Contingent income

The tax rate for individual residents in China

China has a comprehensive seven-tier progressive IIT tax system for foreigners and the rates for each tier are as follows:

Grade Cumulative taxable income (RMB) Withholding rate (%) Quick deduction amount (RMB)
1 <36,000 3 0
2 36,000-144,000 10 2,520
3 144,000-300,000 20 16,920
4 300,000-420,000 25 31,920
5 420,000-660,000 30 52,920
6 660,000-960,000 35 85,920
7 >960,000 45 181,920

The tax rate for non-resident individuals

Grade Cumulative taxable income (RMB) Withholding rate (%) Quick deduction amount (RMB)
1 <3,000 3 0
2 3,000-12,000 10 210
3 12,000-25,000 20 1,410
4 25,000-35,000 25 2,620
5 35,000-55,000 30 4,410
6 55,000-80,000 35 7,160
7 >80,000 45 15,160

Do expats get tax benefits in China?

Yes, foreigners can enjoy the advantages of tax benefits until December 2023. Note that the Chinese government was planning to scrub tax benefits starting in 2022. However, the government extended the IIT policy on foreigners to ensure a smooth transition.

For example, expat taxpayers can deduct up to 1,500 yuan per month for house rental, 1,000 yuan for children’s education, and more until the tax benefits are removed.

What happens if you don’t pay taxes on time?

Annual IIT tax payments can be confusing among individual taxpayers. But make sure to pay taxes before the deadline(i.e., before 30 June). The tax authority of China will send you a reminder. In addition, individuals that fail to pay on time will have to pay a fine at a daily rate of 0.05% and may be subject to more charges. The delayed payment will also leave a mark on your profile and affect your credit score.

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Secure expat health insurance in China with Pacific Prime

Tax filing can be stressful and time-consuming, but do you know what is not? Securing medical health insurance with Pacific Prime China. Whether you are an expat living in the Middle Kingdom or visiting the country, Pacific Prime’s insurance advisors will help you find a plan that meets both your budget and requirement.

Get in touch with Pacific Prime China for a free quote today!

Disclaimer: Pacific Prime China solely represents, operates and manages locally regulated insurance products and services in the territory of PR China. Any references to Pacific Prime Global Company or Group, the international services, insurance products or otherwise stated written or verbally, is for introduction purposes about our overseas network only as each entity is fully independent. 

Lakshmi is an experienced writer with a passion for insurance trends and economics. She has been writing professionally for the past 6 years. Lakshmi has worked on numerous in-depth reports analyzing various insurance trends and providing valuable insights for readers.

Since joining Pacific Prime, Lakshmi has gained a comprehensive understanding of different kinds of health insurance and their importance in people's lives. Her expertise in this area has allowed her to produce informative and engaging content that helps individuals make informed decisions regarding their health insurance.

Lakshmi's clear, concise, and engaging writing style makes complex insurance concepts accessible to readers of all levels and also adheres to Pacific Prime’s motto: - “Simplifying Insurance.”