Employer Tax Contributions

| Tax Type | Rate (Employer) | Base | Individual Income Tax (IIT) | 3% to 45% Progressive Rate | Monthly Salary (before standard deductions and specific deductions) | | Social Insurance - Pension | 16% (avg) | Employee's monthly salary (subject to local caps/floors) |

Filing & Compliance

• Monthly Deadlines: Individual Income Tax (IIT) & Social Insurance/Housing Fund by the 15th (next business day if falls on weekend/holiday).
• Annual IIT Reconciliation: March 1 to June 30 of the following year (for residents with comprehensive income).
• Requirements: Employers must calculate, withhold, and remit IIT, social insurance, and housing fund contributions accurately.

Employee tax deductions in China are multifaceted, encompassing individual income tax (IIT), social security contributions, and specific deductible allowances.

Individual Income Tax (IIT)

IIT is calculated on a progressive scale, ranging from 3% to 45%, depending on income level. A standard deduction of RMB 60,000 per year is applied. Employers are responsible for withholding IIT monthly and remitting it to the tax authorities within the first 15 days of the following month.

• Comprehensive Income: For resident taxpayers, several income types (wages, independent services, author's remuneration, and royalties) are grouped as "comprehensive income" for annual IIT calculation.

• Special Additional Deductions: These deductions are available for specific expenses like childcare, education, continuing education, serious illness, housing loan interest, rent, and elderly care.

Social Security Contributions

Both employers and employees contribute to social security programs, covering pension, medical, unemployment, and work-related injury. Rates and contribution caps vary by city.

• Examples: As of December 31, 2024, in Shanghai, employees contribute 10.5% and employers contribute between 25.66% and 27.02%. In Beijing, employee contributions are 10.5%, and employer contributions range from 26.5% to 28.2%. Guangzhou sees employee contributions of 10.2%, while employers contribute 21.35% to 22.55%. These figures are subject to change.

Tax-Exempt Fringe Benefits for Foreigners

Certain fringe benefits can be deducted from a foreign employee's salary before calculating IIT. These commonly include housing, meals, laundry, children's education, language training, relocation, business travel, and home visit expenses. These deductions require proper documentation (fapiao) for validation. This preferential treatment is currently valid until the end of 2027.

Other Taxes and Deductions

• VAT: Value Added Tax is generally applicable to goods and services. However, wages, government funds, and interest income are specifically excluded from VAT.
• Urban Construction and Maintenance Tax: This tax, levied at rates of 1%, 5%, or 7% depending on location, is not applicable to VAT or consumption tax paid on imported goods or services provided by overseas individuals.

It is important to note that this information is current as of February 5, 2025, and regulations are subject to change. Consulting with a tax professional or utilizing payroll services is recommended for accurate and up-to-date compliance.