Individual income tax adopts source of income as a basis to determine whether the amount is payable. Usually, salaries obtained by an employee during the working period in China, no matter paid by domestic or foreign corporations or individual employers, are categorised as income derived from China.

As in regards to an expatriate, if his or her stay in China has amounted to 90 days consecutively or accumulated stay over 90 days during the year of assessment, or his or her stay in China has amounted to 183 days consecutively or accumulated stay over 183 days during the period required by the tax agreement, he or she shall be required to account for their actual salaries obtained during his or her working period in China paid by domestic or foreign corporations or employers for the purpose of individual income tax, while his or her wages or salaries obtained when working in regions outside China are not subject to individual income tax unless they are members of senior management of domestic corporations in China.

The Basis of Assessment

Tax liability = (amount of chargeable salaries obtained inside or outside the territory of the month × tax rate – quick deduction) × salaries obtained inside the territory of the month/ total amount of salaries obtained inside or outside the territory of the month × the number of working days inside the territory in the respective month/ the number of calendar days of the month

The Official Standard Deductions for Individual Income Tax

• The standard deduction for expenses from individual income tax for Chinese residents is RMB 3,500
• The standard deduction for expenses from individual income tax applicable to expatriates is RMB 4,800