China taxes individuals on worldwide income once they become tax resident, and the test is 183 days of physical presence in a calendar year — not nationality, not visa type. For a foreign employee on assignment, the gap between resident and non-resident treatment is usually the gap between a 45% marginal rate on global income and a withholding calculated on China salary alone.
Resident or non-resident: the 183-day test
Article 1 of the IIT Law defines a resident individual as someone who has a domicile in China, or who has no domicile but resides in China for 183 days or more in a tax year. Residents are taxed on worldwide income; non-residents only on China-sourced income. Presence is counted in actual physical days, with the arrival and departure counting rules in the Implementing Regulations (State Council Order No. 707).
Caution on the "six-year rule". English summaries often state that a foreign individual becomes taxable on worldwide income after six consecutive years of residence. The actual mechanism is narrower than that sentence, depends on how each year is filed, and can be reset by a sufficiently long absence. Treat the six-year shorthand as a pointer to verify, not a conclusion to plan around.
The seven brackets for comprehensive income
Salaries and wages, remuneration for personal services, author's remuneration and royalties are pooled as "comprehensive income" and taxed annually on a progressive scale:
| Annual taxable income (CNY) | Rate | Quick deduction |
|---|---|---|
| Up to 36,000 | 3% | 0 |
| 36,000 – 144,000 | 10% | 2,520 |
| 144,000 – 300,000 | 20% | 16,920 |
| 300,000 – 420,000 | 25% | 31,920 |
| 420,000 – 660,000 | 30% | 52,920 |
| 660,000 – 960,000 | 35% | 85,920 |
| Over 960,000 | 45% | 181,920 |
What comes off before the brackets
| Deduction | Current amount |
|---|---|
| Basic deduction | CNY 60,000 per year (5,000 per month) |
| Social insurance and housing provident fund | Actual employee contributions, within local caps |
| Children's education | CNY 2,000 per child per month |
| Infant care under 3 | CNY 2,000 per child per month |
| Continuing education | CNY 400 per month for a degree, or CNY 3,600 per year for a professional qualification |
| Housing loan interest | CNY 1,000 per month |
| Housing rent | CNY 800, 1,100 or 1,500 per month, by city tier |
| Elderly care | CNY 3,000 per month for an only child; shared between siblings, capped at 1,500 each |
| Serious illness medical | Self-borne portion above CNY 15,000, capped at CNY 80,000 per year |
The 2,000 / 2,000 / 3,000 figures for infant care, children's education and elderly care took effect on 1 January 2023. The deduction information must be confirmed each December under the STA's operational measures; if it is not confirmed, withholding pauses from January of the following year and the employee's net pay changes without explanation.
Worked example: a resident employee
Annual salary CNY 400,000; employee social insurance and housing fund contributions CNY 60,000; one child at school (24,000), housing loan interest (12,000), elderly care as an only child (36,000).
- Deductions: 60,000 + 60,000 + 72,000 = CNY 192,000
- Taxable income: 400,000 − 192,000 = CNY 208,000
- Tax: 208,000 × 20% − 16,920 = CNY 24,680
That is 6.2% of gross salary. The same person with no special additional deductions would pay tax on 280,000 at 20% less 16,920 = CNY 39,080. The documentation is therefore worth roughly CNY 14,400 a year — which is why employers chase the December confirmation.
Non-residents: monthly withholding, no annual scale
A non-resident's China salary is taxed month by month: gross monthly salary less CNY 5,000, with the monthly rate table applied, and no annual reconciliation. Dividends, interest, rent and royalties earned by a non-resident are withheld at a flat 20%, usually reduced under an applicable double tax treaty. Special additional deductions are not simply available to non-residents — the position turns on treaty entitlement and on whether the individual is treated as resident for the year.
Annual reconciliation, 1 March to 30 June
Residents reconcile comprehensive income between 1 March and 30 June of the following year, under the STA's reconciliation measures (STA Order No. 57, effective 26 February 2025), which replaced the year-by-year announcements. Reconciliation is not always required: where tax was correctly withheld and the result is a refund the individual does not claim, or a balance within the stated thresholds, it can be skipped. Where an individual has both comprehensive income and business income, the CNY 60,000 basic deduction and the special deductions may be claimed against only one of them.
Where foreign employees most often go wrong
- Equity compensation. Shares and options vesting during a China assignment are China-source income in proportion to days worked in China, and the employer's withholding obligation starts at vest — not at sale.
- Secondment structures. An employee seconded from a foreign parent but working in China can still create a withholding obligation locally, and the cost-plus recharge is usually taxable.
- Benefits in kind. Housing, school fees and club memberships paid by the employer are taxable salary unless a specific exemption applies.
- Treaty relief not claimed. Short-stay relief under a treaty's employment article requires a certificate of tax residence and the employer's declaration. Without the paperwork, withholding simply happens.
Sources and effective dates
- Individual Income Tax Law of the People's Republic of China — Article 1 (183-day test) and the comprehensive income scale.
- Implementing Regulations of the IIT Law, State Council Order No. 707 — day counting, business income and deduction mechanics.
- State Council Notice No. 41 of 2018 — interim measures for the special additional deductions.
- State Council Notice No. 13 of 2023 — raised infant care, children's education and elderly care to 2,000 / 2,000 / 3,000 per month from 1 January 2023.
- STA Announcement No. 7 of 2022 — operational measures for the deductions, including the December confirmation requirement.
- STA Order No. 57 — measures for the annual reconciliation of comprehensive income, effective 26 February 2025.
Checked against the texts above in November 2026. Treaty positions vary by country; confirm before applying a reduced rate.