Chinese Expat Tax Threshold Remains Unchanged

Expats in China have been disappointed to learn that their current income tax threshold of 4,800 Yuan will remain the same while the rest of China will enjoy an increase in their tax thresholds.

At present the tax threshold applied to people working in China is 2,000 Yuan, with expatriates benefiting from an addition 2,800 Yuan in the form of a special subsidiary for foreigners. On September 1st this year the Chinese government will raise the threshold for income tax to 3,500 Yuan for all taxpayers but the subsidy provided to foreigners will be reduced by the same amount, effectively meaning that the current tax threshold enjoyed by expatriates will remain unchanged.

Discussing the tax thresholds Freeman Bu from Ernst & Young in Shanghai told Chinese newspaper the People’s Dailythat expats have been surprised to hear the news:

“We’ve received lots of inquiries from clients about the expatriate deduction,” he said.

“They have argued that the cost of living is also rising for them as inflation is the same for Chinese and expatriates.

“The move is in line with China’s aim to revise its tax law to let low and medium income families benefit from tax cuts,” he added. “Expatriates are often deemed as high-income earners.”

Under the new tax laws in China many expatriates will find that the amount of tax they are obliged to pay will actually increase, will expatriates earning 18,000 or more Yuan a month being impacted.

In addition to this, from September 1st onwards, the 15 percent and 40 percent brackets will be removed and there will be a new 3 percent rate.

According to news reports in China, the majority of the expatriate workforce are not concerned about the new tax rules. Speaking to China Daily, expatriate John Mellors from the United Kingdom said that he has not considered the impact that the changes will have on his income:

“I and my friends don’t actually know how much tax we paid in the past, because it is directly deducted by our offices,” he said.

“The change is small, so we don’t care about it so much.”