China, People's Republic of

Residents are generally subject to China individual income tax (IIT) on their worldwide income. Non-residents are generally taxed in China on their China-source income only (see the Residence section for more information).

An individual is taxed in China on one's income by category. China's IIT law groups personal income into 9 categories.

The 9 categories of income are:

1. Employment income (i.e. wages and salaries).
2. Remuneration for labour services.
3. Author's remuneration.
4. Royalties.
5. Business income.
6. Interest, dividends, and profit distribution.
7. Rental income.
8. Income from transfer of property.
9. Incidental income.

Each income category has its own tax rate(s), allowable deductions, etc.

For residents, employment income, remuneration for labour services, author’s remuneration, and royalties are combined as 'comprehensive income' for aggregate tax calculation purpose on an annual basis. Income from the other categories is taxed separately by category on a monthly or transaction basis.

For non-residents, income from each of the 9 categories is taxed separately on a monthly or transaction basis.

Personal income tax rates

Comprehensive income tax rates

For residents, calculation of IIT on annual comprehensive income is based on progressive tax rates (see Table I below) using the following formula:

(Annual taxable income x Tax rate) - Quick deduction

Table I

* renminbi

Notes

1. Annual taxable income after deducting the standard basic deduction, specific deductions, specific additional deductions, and other allowable deductions (see the Deductions section for more information).

For non-residents, IIT on employment income, remuneration for labour services, author’s remuneration, and royalties is calculated by each category on a monthly or transaction basis at the below progressive tax rates (see Table II below).

Table II

Business income tax rates

Income earned by individuals from privately-owned businesses, sole proprietorship enterprises, or partnerships is generally subject to IIT at progressive rates from 5% to 35%, as follows:

Tax rates for other personal income

A flat rate of 20% is applied on the remaining categories of income, including incidental income, rental income, interest income, dividends, and capital gains, unless specifically reduced by the State Council.

Local income taxes

There are no local taxes on personal income in China.