Comments on: Tax Day…in China?

By: Andy

Andy — Thu, 09 Apr 2009 05:13:31 +0000

After working five years in companies in Nanjing, I have been paid in USD, EU, RMB all in cash or legitimately. It’s always barrels of fun to read through the IRS and Chinese tax codes to figure out the real deal. Here is a brief guide for everyone’s reference:

http://info.hktdc.com/chinaguide/4-1.htm

By: Linda

Linda — Sun, 27 Apr 2008 06:26:59 +0000

I think the tax-free threshold for foreigners is around 4800rmb, so you probably didn’t need to pay any tax. I was in charge of distributing the salaries for the foreign teachers at my school (a small international school in SH) and some of the staff were getting paid around 20,000rmb a month and it was all paid in cash (sheesh!).

I think the way we got around the tax issue was there were two contracts: the real one (showing the amount staff were actually paid), and then the conctract the government knew about that was used to get working visas (showing that they earned 5000rmb/month). I’ve heard a lot of places have the dual contract system. Gotta love the back door

By: Gabrielle

Gabrielle — Tue, 15 Apr 2008 15:45:14 +0000

I really have no idea how the Chinese pay their taxes, but I was told that I wouldn’t have to pay taxes because I wasn’t getting paid enough to be taxed. In the end I was getting paid 4000 RMB. I was told once what amount you had to make in ordered to be taxed, but my memory fails me now.

I too felt uncomfortable carrying that much money in my pocket. I always feared that somehow I would lose it or a big gust of wind would blow it all away. However, there was something nice about being able to fan myself with that much cash – especially if I had saved a lot over the last few months.

By: FOARP

FOARP — Tue, 15 Apr 2008 12:23:22 +0000

On the other hand, maybe people in China are not the only people justified in feeling that their tax money is going to waste: "Yes, this is a pesky chore, but remember that paying taxes is not a ''one-way street.'' When you send your money to the government, the government, in return, provides you with vital services, such as not putting you in prison. The government also uses your money to pay for programs that benefit all Americans, such as the Catfish Genome Project."

By: FOARP

FOARP — Tue, 15 Apr 2008 09:32:29 +0000

@Ben – Tax in China is just about as much of a pain in the posterior as it is in other places. My company had had the excellent idea of listing me as self-employed for tax purposes, hence all the tax forms needed to be filled in by me every week and filed with the appropriate office – and with the usual stamps. Halfway through my contract the Shenzhen government decided that foreign employees were all going to have to pay the full 30% income tax on taxable income on top of the 8% tax we had been paying up until then – thankfully the company decided to take up some of the slack, but it did make something of a mockery of our 30% pay rise for the second year.

As for how things are arranged for university teachers etc., I understand that the first 6,000 is tax free for foreigners – hence never having to worry about it. For Chinese employees I think the tax is deducted from the pay check automatically along the lines of the PAYE (pay as you earn) system we have here in the UK – the company does all the tax stuff for you. Income tax for Chinese employees starts at 1500 yuan – but I think this is going to rise to 2000.

Was I grateful for the virtual tax-free status I enjoyed during most of my stay in China? Absolutely. However, once I started being taxed it really began to irk me that I was basically receiving nothing for the tax money I was handing over. The police seemed incapable even of stopping a man walking stark naked past their guard post at the end of my road, socialised healthcare is non-existent and education for the children of my collegues was paid for entirely by themselves – although I understand that the government is instituting free education in the countryside. Military spending, on the other hand, makes up a sixth of all government spending (i.e., 5% of GDP out of the 30% (roughly) of Chinese GDP constituted by combined central and local government spending) – and is hardly going to be used for purposes I agree with. I suppose the streets were kept (reasonably) clean and the roads and infrastructure were (after a fashion) maintained – but this is not much compensation.

By: Turtlewind

Turtlewind — Tue, 15 Apr 2008 08:08:19 +0000

Quoted salaries for office jobs in China are usually before tax, but it gets taken out before you receive the money so you don’t have to calculate things yourself. I believe you also have to fill in an annual tax statement if you’ve earned more than 100,000 RMB in the previous year, but as far as I know you don’t actually pay the tax at that point.

Income tax in China is a progressive tax, so you pay nothing on the first X RMB per month, then a low rate on the next band and gradually higher amounts as your salary increases. Your barbershop wages were probably low enough that you didn’t have to pay any tax there, but 4500 a month should be well above the minimum threshold. It’s possible that they rolled that into your salary beforehand, but based on their evasive answers I guess they just weren’t paying any.