Tax Plan for China

Tax Plan for China

The China’s Ministry of Finance and the State Administration of Taxation have a plan to reduce the incidence of individual income tax on low to middle incomes for the next year.

There is a lot of concerns at the widening income gap between the wealthy and the low to middle income earners in the country, despite previous efforts to reduce it through the income tax system by increasing the tax threshold.

Nowadays the individual income tax system for a Chinese resident is based upon an initial monthly income threshold before tax payments are due of CHY2,000 (USD300), followed by nine progressive tax rates between an initial 5% for a total monthly taxable income of CHY2,001 to CHY2,500, and 10% for between CHY2,501 to CHY4,000, up to a marginal rate of 45% for monthly income levels above CHY12,000.

It is therefore now reported that the proposed income tax reform will attempt to benefit lower-paid employees in particular, not only by raising the initial tax threshold, but also by reducing the number of tax rate tiers and, thereby, increasing substantially the income levels at which the first two tiers occur.

Braxton Asia may help you on this and other tax planning issues.