Page 31 - Doing Business in China

TAXATION

d) Assessment and administration
The tax year starts on 1 January and ends on 31 December�

All companies are required to submit their provisional tax returns and advance tax payments in RMB (to be
determined by the tax authorities), within 15 days after the end of the month/quarter� An annual EIT tax
return, together with financial and accounting reports and other relevant information (e�g� related party
transactions annual return), should be filed within five months after the end of the tax year, regardless of
whether the enterprise makes profits or losses� Any deficiency shall be settled within five months of the end
of each tax year and any overpayments shall be refunded�

Companies in a group are not allowed to pay EIT on a consolidated basis, unless approved by the State Council�

INDIVIDUAL INCOME TAX (IIT)
a) Payment and calculation
Whether or not expatriates working in China are subject to IIT in China depends on several key factors:
• Amount of the expatriate’s income
• Duration of stay
• Income source
• Positions held by the expatriate in his or her host country and home country’s company

Expatriate’s level of income
The expatriate income, including base salary, incentive compensation such as commissions and bonuses,
cash allowances and contributions to overseas insurance scheme, should be subject to China IIT under the
‘comprehensive income’ category, if such income is related to a job assignment in China�

Therefore, the tax rate levied on that comprehensive income depends on its cumulative amount� China applies
a progressive tax system with seven levels ranging from 3% to 45%� As of 1 October 2018, the standard
deduction on comprehensive income is RMB 60, 000 on an annual basis for all tax residents, which means
that the standard deduction is RMB 5,000 per month�

In addition, for each level of the progressive taxation system, an additional ‘quick deduction’ amount will be
deducted from this level of taxable income�

The following table gives an overview of IIT taxation grades for expatriates’ comprehensive income�

Income Range (RMB) Tax Rate (%) Quick Deduction (RMB)
<3,000 3 0
3,000–12,000 10 210

Over 12,000–25,000 20 1,410
Over 25,000–35,000 25 2,660
Over 35,000–55,000 30 4,410
Over 55,000–80,000 35 7,160

>80,000 45 15,160

As mentioned earlier, the monthly standard deduction for expatriates is RMB 5,000 per month� Therefore, the
following formula is used to calculate the expatriate’s monthly IIT burden:

[(Gross Monthly Taxable Income – RMB 5,000) x Tax Rate] – Quick Deduction

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