Understanding the Individual Income Tax (IIT) in China is essential for anyone earning income within the country. Let's delve into the various tax rates that are applied to different types of personal income.

China’s individual income tax: a quick overview

Hello, welcome to Cathytax!

Understanding China’s Individual Income Tax (IIT) structure is crucial for individuals earning income within the country.

China’s Individual Income Tax (IIT) structure encompasses various tax brackets and rates applicable to distinct sources of personal income. From salaries and labor earnings to dividends and property income, each category bears specific taxation rules.

Let’s delve into the various tax rates that are applied to different types of personal income.

1st — Salaries, Labor Income, and Royalties

Salaries, income from labor services, and royalties are subject to progressive tax rates ranging from 3% to 45%. A noteworthy aspect of this category is the fixed annual deduction of RMB 60,000. Accordingly, can significantly affect the amount of taxable income. Furthermore, taxpayers can benefit from several items of additional deduction, which provide further relief.

Man holding a clipboard with a report in his right hand and in his left hand holding a pen, pointing to the front of the image at the dull background. This image illustrates China's Individual Income Tax.

2nd — Income from Individual Business Operation

Income from individual business operations is taxed progressively as well, with rates from 5% to 35%. This encourages entrepreneurs and individual business owners to actively participate in the economy while being mindful of their tax obligations.

3rd — Interest, Dividends, Property, and Accidental Income

Income from interest, dividends, property leasing or transfer, and accidental income is subject to a flat tax rate of 20%. Notably, it is important to note that there are no deductions available for this category, simplifying the tax calculation process but also increasing the tax burden for some individuals.

Understanding these tax brackets and rates is not just a matter of legal compliance—it’s also a strategic component of financial planning. Whether you’re a salaried employee, a freelancer, or a business owner, being aware of China’s Individual Income Tax rules can help you optimize your tax position.

Follow us, and learn more about doing business in China. We aim to continually provide valuable information on tax regulations and business strategies to benefit you and your ventures within this dynamic economy.

Sign Up for our Newsletter

Don't miss new updates and articles on your email