Individual Income Tax in China: A 2026 Guide
China's individual income tax (IIT) system combines progressive taxation of employment-style income with flat rates for other income types. Whether you are moving to China for work, hiring staff there, or earning income from Chinese sources while living abroad, the resident-versus-non-resident distinction and the annual filing cycle are the two concepts that matter most. This guide covers the 2026 rules.
Who pays: residents vs non-residents
China taxes resident individuals on worldwide income and non-resident individuals only on China-sourced income.
| Status | Definition | Tax scope |
|---|---|---|
| Resident individual | Domiciled in China, or not domiciled but physically present in China for 183 days or more in a calendar year | Worldwide income |
| Non-resident individual | Not domiciled and present fewer than 183 days in a calendar year | China-sourced income only |
The tax year runs 1 January to 31 December. Days are counted on physical presence. A separate "six-year rule" can exempt a non-domiciled resident's foreign-sourced income paid by foreign entities if they break residence in any year of a six-year stretch โ worth checking with a professional if you split time between countries.
The 7-bracket progressive rate table
Employment-type income โ salary and wages, remuneration for personal services, author's remuneration, and royalties โ is pooled as comprehensive income and taxed at seven progressive brackets (unchanged for 2026):
| Bracket | Annual taxable income (RMB) | Rate | Quick deduction (RMB) |
|---|---|---|---|
| 1 | Up to 36,000 | 3% | 0 |
| 2 | 36,000 โ 144,000 | 10% | 2,520 |
| 3 | 144,000 โ 300,000 | 20% | 16,920 |
| 4 | 300,000 โ 420,000 | 25% | 31,920 |
| 5 | 420,000 โ 660,000 | 30% | 52,920 |
| 6 | 660,000 โ 960,000 | 35% | 85,920 |
| 7 | Above 960,000 | 45% | 181,920 |
Taxable income = gross comprehensive income minus the basic deduction, social insurance and housing fund contributions, special additional deductions, and other statutory deductions. For personal services and royalties, only 80% of gross counts as the income amount; author's remuneration counts at 80% then a further 30% reduction (effectively 56%).
Other income is taxed separately at flat rates: business operation income uses a 5-bracket scale (5%โ35%); interest, dividends, bonuses, property leasing, property transfers, and incidental income are taxed at a flat 20% (with a reduced effective treatment for certain items such as stock-transfer gains under specific rules).
The basic deduction: RMB 60,000 per year
Every resident taxpayer gets a basic deduction (่ตทๅพ็น) of RMB 5,000 per month, i.e. RMB 60,000 per year, subtracted before the brackets apply. In practice this means the first RMB 60,000 of annual comprehensive income (after other deductions) is tax-free.
The seven special additional deductions
On top of the basic deduction and social insurance, residents can claim these itemized deductions. Current standards (raised in 2023, applicable through 2026):
| Deduction | Standard | Key conditions |
|---|---|---|
| Children's education | RMB 2,000/month per child | Full-time education from age 3 through doctoral level; split 50/50 or 100% to one parent |
| Infant and toddler care (under age 3) | RMB 2,000/month per child | Child under 3 years old |
| Continuing education | RMB 400/month (academic, max 48 months) or RMB 3,600/year (professional qualification) | During the education period / year the certificate is obtained |
| Serious illness medical expenses | RMB 15,000 โ 80,000/year, actual amount | Self-paid portion above RMB 15,000 within a year, capped at 80,000 |
| Mortgage interest (first home) | RMB 1,000/month, max 240 months | First-home loan interest only; one home per lifetime |
| Housing rent | RMB 1,500 / 1,100 / 800 per month | Tiered by city size; cannot claim together with mortgage interest |
| Supporting elderly parents | RMB 3,000/month (only child); shared RMB 3,000/month (non-only child, max 1,500 each) | Parents aged 60 or above |
The annual settlement: 1 March โ 30 June
Employers withhold tax each payday using a cumulative method, but the final bill is settled in the annual reconciliation (ๅนดๅบฆๆฑ็ฎๆธ ็ผด), filed 1 March to 30 June of the following year โ for 2025 income, the window is 1 March to 30 June 2026. File through the Individual Income Tax app or the e-tax portal.
You must file if you need a refund, or if you owe additional tax above the thresholds. You are exempt from filing if: your annual comprehensive income is RMB 120,000 or less and you owe top-up tax; the top-up is RMB 400 or less; withholding already matches the final liability; or you qualify for a refund but choose not to claim it. Non-residents do not file annual settlements โ their tax is settled through withholding.
How withholding works month to month
Your employer does not simply apply the annual table to each paycheck. China uses a cumulative withholding method (็ดฏ่ฎก้ขๆฃๆณ): each month, the employer totals your year-to-date income, subtracts year-to-date deductions, applies the annual bracket table to the cumulative figure, then subtracts tax already withheld. Early in the year your effective withholding rate is low; it rises as cumulative income climbs into higher brackets. This is why two people with the same December paycheck can have very different December withholding โ it depends on what they earned from January.
If you change jobs mid-year, the new employer starts its own cumulative count from zero unless you provide the prior withholding records. Many people discover at the annual settlement that changing jobs without carrying records forward created a top-up bill.
How non-residents are taxed
Non-resident individuals do not use the annual settlement. Instead, tax is computed per payment:
- Monthly salary: the monthly equivalent of the bracket table applies (monthly taxable income = monthly salary minus RMB 5,000 and applicable deductions).
- Personal-services, author's remuneration, and royalties: taxed per payment at 20%, with the 80% (and 70% for author's remuneration) income-amount conversions.
- Bonuses and equity compensation have separate computation rules that generally spread the amount over the months of service.
Because non-residents cannot claim the seven special additional deductions (those are resident-only), someone splitting a year across the 183-day line can face noticeably different liabilities on identical pay.
A worked example
Li earns RMB 20,000/month salary (RMB 240,000/year), pays RMB 30,000/year in social insurance, claims RMB 24,000/year for one child's education and is an only child supporting parents (RMB 36,000/year).
Taxable income = 240,000 โ 60,000 โ 30,000 โ 24,000 โ 36,000 = RMB 90,000.
Tax = 90,000 ร 10% โ 2,520 = RMB 6,480 for the year โ an effective rate under 3% of gross pay. Deductions do the heavy lifting in China's system.
Next steps
- If you are relocating, track your days of physical presence โ crossing 183 days flips you to worldwide taxation.
- Register all seven special additional deductions in the Individual Income Tax app before year-end so withholding reflects them monthly.
- Mark 1 March โ 30 June in your calendar for the annual settlement, and keep medical-expense receipts โ serious-illness deductions are claimed only at settlement.
- If you earn both salary and freelance income in China, remember they are pooled as comprehensive income; set aside roughly your marginal rate on freelance receipts.