How to Calculate Income Tax in Mainland China: Salary, Year-End Bonus
This guide explains how income tax in mainland China applies to salary and wages, year-end bonuses, labor remuneration, and incidental income. It also shows the main salary formula, bonus formula, deduction items, and the tax tables most commonly used in practical payroll and personal income planning.
If you are trying to calculate China income tax, the first step is to identify the type of income. Salary is not calculated in the same way as a year-end bonus, and neither of them is treated in the same way as labor remuneration or incidental income. For employers, foreign-invested companies, and individuals working in China, understanding these differences makes it easier to estimate take-home pay, payroll withholding, and total tax exposure.
If your company also needs help with payroll setup, bookkeeping, or broader compliance in China, Asomerit also provides support for bookkeeping and accounting, WFOE registration, and related corporate services.
This article focuses on four common mainland China IIT topics that are most relevant for salary planning and personal income calculation: salary and wages, year-end bonuses, remuneration for labor services, and incidental income.
Salary and wages usually refer to employment income received because a person holds a position or works for an employer. In practice, this may include regular salary, wages, bonuses, allowances, subsidies, and other employment-related income.
A year-end bonus is usually part of employment income, but a qualifying annual one-off bonus may still use a separate tax calculation method under the current policy.
This is different from salary. It usually refers to service income earned outside a normal employment payroll relationship, such as consulting, design, lecturing, translation, legal, accounting, or similar work.
Incidental income is generally taxed separately and is commonly introduced as a flat 20% IIT item in simple practical guides.
For payroll purposes, salary calculation usually starts with gross salary, then deducts employee-side statutory items and eligible deduction items before arriving at the tax base and the final net salary. For a simple salary guide, this is the clearest way to explain how salary tax in China works.
Gross salary means pre-tax salary before IIT and before employee-side statutory deductions. Net salary means the amount the employee actually receives after employee-side social insurance, housing fund, and IIT are withheld.
| Item | How it works |
|---|---|
| Gross salary | Monthly pre-tax salary |
| Less: employee social insurance and housing fund | Employee-side statutory deductions |
| Less: special additional deductions | If claimed |
| Less: eligible foreign tax-exempt fringe benefits | If applicable |
| Less: monthly basic deduction | RMB 5,000 |
| = Estimated monthly taxable salary | Base used for tax calculation |
| Less: IIT | Calculated using the applicable rule |
| = Net salary | Amount received by the employee |
The main deduction items usually discussed in China salary tax planning are:
Special additional deductions commonly include childcare under age three, children’s education, continuing education, major illness medical expenses, housing loan interest or housing rent, and elderly care.
For qualifying foreign individuals, certain fringe benefits such as housing, children’s education, language training, meal, laundry, relocation, business travel, and home leave may still be relevant in practice. Eligibility depends on the individual's annual IIT treatment choice and whether the applicable policy conditions are met. These items should be checked carefully before being used in a payroll calculation.
A qualifying annual one-off bonus may still be taxed separately under the current policy. In practical year-end bonus tax planning, this is usually compared with the method of combining the bonus with annual comprehensive income.
| Monthly-converted amount (RMB) | Rate | Quick deduction |
|---|---|---|
| Up to 3,000 | 3% | 0 |
| 3,000 to 12,000 | 10% | 210 |
| 12,000 to 25,000 | 20% | 1,410 |
| 25,000 to 35,000 | 25% | 2,660 |
| 35,000 to 55,000 | 30% | 4,410 |
| 55,000 to 80,000 | 35% | 7,160 |
| Over 80,000 | 45% | 15,160 |
Under the separate calculation method, the bonus tax is usually shown like this:
Bonus tax
= Annual one-off bonus × applicable rate - quick deductionThe applicable rate is determined by dividing the annual bonus by 12 and locating the correct bracket in the monthly-converted bonus table.
For a more practical result, many companies compare the separate method with the combined method before finalizing payroll and tax treatment.
Labor remuneration is different from salary. It usually applies to independent service income rather than income paid under a normal employment payroll relationship.
Simple withholding base formula
If each payment is RMB 4,000 or less:
Taxable base = each payment - RMB 800
If each payment is above RMB 4,000:
Taxable base = each payment × 80%Withholding tax on labor remuneration is generally applied at 20%. For annual comprehensive income purposes, labor remuneration is subject to the same progressive rates as salary at annual reconciliation.
This is one reason why labor remuneration should not be explained as if it were identical to normal monthly salary.
Incidental income is usually introduced as a separate IIT category with a flat 20% rate.
Simple incidental income formula
Incidental income tax
= incidental income × 20%
If you need support with payroll tax in China, employee salary calculations, bookkeeping, or foreign-invested company compliance, Asomerit can help with practical setup and ongoing support.