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Personal Taxation in Shanghai


China income tax rates are progressively between 5%-45%. A resident individual, i.e. an individual "domiciled" in the Chinese Mainland, is subject to individual income tax on his/her worldwide income. Most non-residents or residents of less than a year are subject to personal tax only on income sourced in China. Non-domiciled individuals staying in China for more than a year but less than five consecutive full tax years are subject to individual income tax on China source income, plus foreign income actually borne by Chinese entities or establishments. Non-domiciled individuals staying in China for more than five consecutive full tax years are taxed on worldwide income.

The test for residence in China is whether an individual is usually or habitually residing in China due to household, family or economic involvement. Each individual must file a separate return; joint filing is not permitted.

All individuals, except for PRC nationals, generally must register with the Chinese tax authorities as soon as they become liable to individual income tax. Tax year is calendar year.

Taxable Income

Taxable income comprises employment income; production and business income; income derived from contracting for, or leasing operations of, enterprises or institutions; dividends and bonuses; interest income (except interest from bank deposits); royalty income; income from leasing property; income from the assignment or transfer of property; contingency income; unemployment insurance premiums paid by an enterprise in excess of the premium rates specified by law; and other income specified as taxable by the finance department of the State Council.

Capital Gains

Gains derived from the sale of property, net of relevant expenses and taxes, are subject to tax at a rate of 20%. Gains on the sale of real property are also subject to Land Value Added Tax. Individuals are generally exempt from tax on gains from the sale of their sole private dwelling if they have occupied the residence for five years. Income from currency trading (i.e. the purchase and sale) over the internet is subject to a 20% tax.

Deductions & Allowances

Deductions and allowances are available depending on the category of income. For wages and salaries received in the PRC, individuals are entitled to a fixed monthly deduction of ¥2,000 (foreign nationals are entitled to an additional fixed deduction of ¥2,800).

Personal basic contributions are deductible for domestic individuals. These include payments to housing funds and certain medical insurance, pension and unemployment insurance payments.

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