WEEK 3 SLIDES TAX .pdf
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1、Tax Planning 1 Individual Income Tax 1 Who is Subject to IIT? All individuals who are domiciled in China or live in China for more than one year are subject to China tax on their worldwide income. Special rules apply to foreigners who spend Cme outside of China (generally 30 consecuCve days at least
2、 once every fi ve years) and are taxed only on China sourced income. China is one of the few countries (USA is another) that tax ciCzens on worldwide income 2 Tax Planning 2 IIT Types of Income Taxed at graduated rates from 5% to 45% based on monthly income Wages and Salaries Taxed at graduated rate
3、s from 5% to 35% based on annual income Business Income Taxed at fl at rate of 20% (special rates someCmes apply) Authors Labor services RoyalCes, rents, interest dividends, capital gains, other 3 Exempt Income Certain awards from government or internaConal insCtuCons Interest on government bonds Al
4、lowances and subsidies from the State Welfare benefi ts, survivors benefi ts, relief payments Insurance compensaCon Military severance pay and demobilizaCon pay RelocaCon allowances, severance pay, reCrement pay Income of diplomats Income that is tax free because of tax treaCes Other income the Stat
5、e Council declares tax free Gains on sale of stock from stock exchanges 4 Tax Planning 3 Special Cases Following types of income can be exempt aer approval: Income of disabled, elderly persons or family members of a martyr Where a serious naConal disaster causes major losses For Wenchuan earthquake,
6、 certain preferenCal tax treatments have been allowed. Where the State Council approves. 5 DeducCons for Employees Housing fund contribuCon (Cai Shui 2006 No. 10) ContribuCons to housing fund by either employee or employer are excludible or deducCble Limit is 12% of employees average monthly salary
7、for preceding year Average monthly salary not to exceed 3 Cmes the city average Charitable ContribuCons (Cai Shui 2008 No.62) ContribuCons to domesCc social organizaCons and government agencies for educaCon, public welfare and disaster/poverty are deducCble Limit is 30% of taxable income, no limit f
8、or certain organizaCons (such as Red Cross Society of China and China Charity FoundaCon) 6 Tax Planning 4 DeducCons for Employees Local employees - RMB 2,000 per month (Mar 08) Foreign naConal employees RMB 4,800 per month AddiConal deducCons/exclusions for non-domiciled foreign naConals EducaCon fo
9、r children Home leave Housing Meals and laundry expenses Language training 7 Employment Tax Rates 8 Monthly Income Tax Rate Quick Deduc7on 500 Yuan or less 5% 0 500 to 2,000 10% 25 2,000 to 5,000 15% 125 5,000 to 20,000 20% 375 20,000 to 40,000 25% 1375 40,000 to 60,000 30% 3375 60,000 to 80,000 35%
10、 6375 80,000 to 100,000 40% 10375 100,000 45% 15375 Tax Planning 5 Proprietorship Tax Rates Annual Income Tax Rate Quick Deduc7on 5,000 Yuan or less 5% 0 5,000 to 10,000 10% 250 10,000 to 30,000 20% 1,250 30,000 to 50,000 30% 4,250 50,000 35% 6,750 9 CalculaCons Tax on employment income is calculate
11、d monthly. Annual bonus is subject to special rule Tax rate is determined on 1/12 of bonus ResulCng tax rate is mulCplied by enCre bonus Quick deducCon is allowed against total tax No standard deducCon unless not used against salary Impact is to give benefi t of graduated rates 10 Tax Planning 6 Oth
12、er income Rents, royalCes, personal services etc. Gross income 20,000 Less 20% of gross income or 800 4,000 Taxable Income 16,000 Tax at 20% 3,200 11 Expatriate TaxaCon in China This informaCon provided by PricewaterhouseCoopers 12 Tax Planning 7 Recent Changes Bonus taxaCon 13 month pay is no longe
13、r considered a bonus, and must be added to regular pay in calculaCng tax. Directors pay Directors pay is no longer subject to the 20% rate if the director is also an employee. It is added to employment income. Guoshuifa 2009 No.121 13 Non-Taxable Expatriate Benefi ts Following items if directly paid
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