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Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
Tax Planning in China - Individual Income Tax
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Tax Planning in China - Individual Income Tax

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An NCO China Presentation: Tax Planning in China - Individual Income Tax

An NCO China Presentation: Tax Planning in China - Individual Income Tax

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  • 1. Tax Planning for<br />Small and Medium Sized Enterprises in China<br />
  • 2. Individual Income Tax<br />for Expatriates in China<br />
  • 3. Individual Income Tax for Expatriates in China<br />Individual Income Tax (IIT) is determined by the expatriate’s:<br />length of time stayed in China;<br />source of income.<br />
  • 4. Individual Income Tax for Expatriates in China<br />
  • 5. Individual Income Tax for Expatriates in China<br />An expatriate working for a Representative Office (RO) does not follow the 183-day rule.<br />
  • 6. Income Sources<br />China Source Income:<br />Income generated in China. <br />Non-China Source Income:<br />Income generated outside of China.<br />
  • 7. Income Sources<br />China Source Income is:<br />Income from service, employment and performance of contracts in China;<br />Income from leasing property in China;<br />Income from the assignment of property in China, e.g. buildings, land-use rights;<br />Income from interests, dividends and bonuses from Chinese companies, commercial organizations or individuals in China.  <br />
  • 8. Position Level<br />Top management positions includes:<br />General Manager;<br />Deputy Manager;<br />Director;<br />Functional Positions; and<br />Other management positions.<br />
  • 9. Reimbursements Exempt from IIT<br />An expatriate’s income may be IIT exempted for reasonable reimbursements such as:<br />Housing allowance, meal allowance and laundry expenses;<br />Relocation allowance for employment or demission in China;<br />Reasonable per diem expenses from business trip in and outside of China;<br />Expenses reimbursements for home leave;<br />Language training and education expenses.<br />
  • 10. Key Points About Declaring IIT(Employment Income)<br />Employees have an obligation to pay IIT;<br />Employers have an obligation to withhold IIT from employees;<br />An employee’s taxable income is calculated by subtracting an allowed monthly deduction of RMB 4,800 from the monthly salary and wage;<br />A progressive tax rate is applied to salaries and wages. The tax rate ranges from 5% to 45%;<br />ITT is withheld by the employer and paid to the tax authorities before the 7th day of the following month.<br />
  • 11. Individual Income Tax Rates(Employment Income)<br />
  • 12. Calculating IIT(Employment Income)<br />Individual Income Tax (IIT) Payable<br />equals <br />[Monthly Income – Monthly Deduction (RMB 4,800)] <br /> X Applicable Tax Rate – Quick Deduction<br />Example<br />A professor has a monthly salary of RMB20,000. The IIT payable is:<br />Taxable Income = RMB 20,000 – RMB 4,800 <br /> = RMB 15,200<br />IIT Payable = RMB 15,200 X 20% - 375 <br /> = RMB 2,665<br />
  • 13. Key Points About Declaring IIT(Service Contract Income)<br />A contractor’s taxable income is calculated by subtracting an allowed monthly deduction of:<br />RMB 800 (if the service fee is less than RMB 4,000) or <br />20% of the service fee (if the service fee exceeds RMB 4,000)<br /> from the monthly contract service fee.<br />A progressive tax rate is applied to contract service income. The tax rate ranges from 20% to 40%;<br />Service contractors must paid IIT to the tax authorities before the 7th day of the following month.<br />
  • 14. Individual Income Tax Rates(Service Contract Income)<br />
  • 15. Calculating IIT(Service Contract Income)<br />Individual Income Tax (IIT) Payable<br />equals <br />[Monthly Service Fee – Monthly Deduction Allowance] <br /> X Applicable Tax Rate – Quick Deduction<br />Example<br />A independent contractor receives a service fee of RMB 3,500 for services rendered in January. The IIT payable is:<br />Monthly Deduction Allowance is RMB 800 as service fee is less than RMB 4,000.<br />Taxable Income = RMB 3,500 – RMB 800 <br /> = RMB 2,700<br />IIT Payable = RMB 2,700 X 20% - 0 <br /> = RMB 540<br />
  • 16. Calculating IIT(Service Contract Income)<br />Individual Income Tax (IIT) Payable<br />equals <br />[Monthly Service Fee – Monthly Deduction Allowance] <br /> X Applicable Tax Rate – Quick Deduction<br />Example<br />If the independent contractor received a service fee of RMB 30,000 for services rendered in February. The IIT payable is:<br />Monthly Deduction Allowance is 20% of RMB 30,000 = RMB 6,000<br />Taxable Income = RMB 30,000 – RMB 6,000 <br /> = RMB 24,000<br />IIT Payable = RMB 24,000 X 30% - RMB 2,000 <br /> = RMB 5,200<br />
  • 17. Requirement to Declare IIT<br />According to Individual Income Tax Law, an individual must declare IIT when they have:<br />An annual income over RMB120,000 (this excludes individuals who have no residence in China and have lived in China for less than 1 year during a tax year);<br />Salaries and wages from two or more companies in China;<br />Earned taxable income that have not been withheld by an employer.<br />
  • 18. Annual Income over RMB 120,000<br />Annual income over RMB 120,000 within the tax year includes income from the following sources :<br />Salaries and wages;<br />Incomes from production and operation of a privately owned business;<br />Incomes from contracts and leasing of enterprise and public institution;<br />Service fees;<br />Remuneration;<br />Income from interests, dividends and bonus;<br />Income from property leasing;<br />Income from property transfer;<br />Other.<br />
  • 19. Requirement to Declare IIT<br />Expatriates with an annual income over RMB120,000 must declare and pay IIT to the tax authorities within three months after the tax year.<br />
  • 20. Tax Planning Tips<br />If an Expatriate has resided in China for more than 5 years , their worldwide income is subject to IIT.<br />An expatriate who has stayed in China for almost 5 years may break this 5 year residency rule if they stay 30 days outside of China on a single trip, or an accumulated period of 90 days in the calendar year.<br />Expatriates should take advantage of the special tax calculation method for bonuses that are paid one-time during the year.<br />
  • 21. Tax Planning Tips<br />Concept of FAPIAO and its relationship with tax preferential policy; <br />Private car using for company;<br />Social insurance; <br />Commercial insurance; <br />Expatriate working as part-time in China:<br />
  • 22. Contact Us<br />NCO China<br />tel:  +86 (10) 8447 8118<br />fax: +86 (10) 8447 9349<br />e-mail:  enquiry@ncochina.com<br />website: www.ncochina.com<br />

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