No Benefit For Expats In China's Income Tax Changes

By Editorial 02 August, 2011

Immediately following news that the personal income tax threshold was to be raised in China, it was also confirmed that expatriates working in the country will not obtain any benefit from it.

With effect from September 1 this year, the government has decided to increase the monthly personal income tax monthly threshold to RMB3,500 (USD544), from the current level of RMB2,000. That rise in the threshold is applicable to both residents and non-residents alike.

Foreigners employed in China presently also benefit from an additional deduction for expenses of RMB2,800. However, that deduction will be reduced to RMB1,300 from September 1, or by the same amount as the increase to the threshold. In that case, the total threshold for expatriates will remain at RMB4,800.

In addition, the new law reduces the previous nine tax brackets to seven, eliminating the brackets with tax rates of 15% and 40% (the top rate of tax remaining at 45%). It has been calculated that most expatriates will, given their higher incomes, be liable to pay more tax after those changes. Nevertheless, given that the increased tax payable will be marginal, it is not thought that expatriates will be particularly concerned.

Tags: Individuals | Expatriates | Tax | Investment | Law | China | Tax Thresholds | Tax Rates | Individual Income Tax |


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