Income tax for foreigners in China — the practical guide

Tax resident or not? The 183-day rule

The single most important concept in Chinese personal tax:

• Non-resident (resident in China fewer than 183 days in a calendar year): taxed only on China-source income. If your employer pays you from abroad and you're under 183 days, your tax bill can be very small.
• Tax resident (183+ days in a calendar year): taxed on worldwide income, but you get the standard deductions and the foreigner's extra deduction (below), so it rarely means double taxation.

Since 2019, a second threshold exists: if you live in China for 183+ days in a year but fewer than 183 in six consecutive years, your foreign-source income (salary paid abroad, foreign investments) is still exempt — China only taxes your China-source income. Full worldwide taxation effectively starts in year seven of continuous residency. Most expats never hit it.

The brackets: 3% to 45%

Employment income is taxed on taxable income — gross minus deductions — using these monthly brackets (the annual brackets are exactly ×12):

Yes, 45% is the top marginal rate — but remember it applies only to the slice of income above ¥80,000/month after deductions, so the effective rate on most salaries is far lower. Use the salary calculator to see your effective rate.

Deductions — including the foreigner bonus

To find your taxable income, subtract from gross salary:

1. Basic deduction: ¥5,000/month (¥60,000/year) — for everyone.
2. Social insurance and housing fund — your employee share (see the social insurance guide).
3. Foreigner's extra deduction: ¥3,500/month — this is the big one. It represents tax-exempt allowances for housing, children's education, language training and home-leave travel. Currently extended to 31 December 2027. Locals don't get it; instead they can claim "special additional deductions" (children's education, elderly care, housing loan interest, etc.), which foreigners with dependents can also claim in some cases — ask your accountant.

How tax is actually collected

You almost never pay tax yourself — your employer withholds it monthly from your salary (代扣代缴) using the cumulative withholding method, and files the annual reconciliation (年度汇算) for you. What that means practically:

• Every month, payroll software computes your tax on the cumulative year-to-date income, which makes your withholding smooth and roughly correct.
• In March-June of the next year, the annual reconciliation compares what was withheld vs. what was owed. If too much was withheld → refund. If too little (rare for single-employer cases) → you pay the difference.
• You can do the reconciliation yourself in the 个税 App (official IIT app) or let your employer do it. The app has an English mode for foreigners.

Getting money back at year end

Refunds are common. Typical triggers:

• You changed jobs mid-year — the new employer starts your cumulative tax at zero, you overpaid in the first months.
• You didn't claim the foreigner's deduction fully (e.g. your HR used it only after some months).
• You have deductible expenses: rental contract (housing allowance claim), children's education in China, elderly care, self-education, charitable donations.
• You left China mid-year — the annual reconciliation usually refunds the difference for the months you weren't working in China.

Refunds are paid to your Chinese bank account. If you don't have one yet, open one first — see the bank account guide.

If you're self-employed or have side income

Freelancing in China as a foreigner is legally sensitive — you generally need work authorization (see the work permit guide) before earning income in China. If you have legitimate self-employment or side income:

• Business income is taxed at progressive rates of 5%–35% on annual taxable income (a different scale from salaries).
• Interest, dividends, royalties and rental income are typically taxed at 20% (with some deductions for rental).
• Bank transfers over certain thresholds can be flagged — keep records and declare properly. This is where a good bilingual accountant earns their fee.