| A ¥20,000 monthly salary in China, ¥4,400 social insurance | Tax withheld | Take-home |
|---|---|---|
| January | ¥318 | ¥15,282 |
| April | ¥766 | ¥14,834 |
| May to December, each month | ¥1,060 | ¥14,540 |
| The whole year | ¥10,200 |
The salary never changes, and the tax on it more than triples between January and May. China taxes a resident's wages once a year, on the year's income, and what the employer takes each month is a running payment towards that annual bill. Early in the year the running total is small and sits in the 3% band; once it passes the top of that band, every later month is withheld at a higher rate. For a salary like this one, paid by one employer all year, the twelve payments add up to exactly the year's tax.
The figures are in yuan (RMB). They assume ¥4,400 a month taken for social insurance and housing fund (五险一金) and no other deductions. That is about what a ¥20,000 salary costs in Beijing, Shanghai, Guangzhou or Shenzhen with a 12% housing fund.
The year-to-date sum behind every payslip
A resident's comprehensive income (综合所得), which for most people is simply their wages, is taxed on the year's income less ¥60,000, less the employee's social insurance and housing fund, less the special additional deductions (专项附加扣除) for things like children's education and rent. That remainder is taxed at 3% on the first ¥36,000, 10% up to ¥144,000, and so on to 45% above ¥960,000 (Individual Income Tax Law, articles 6 and 11).
The monthly withholding follows a rule called cumulative withholding (累计预扣法), set by the State Taxation Administration in Announcement No. 61 of 2018. Each month the employer adds up your income for the year so far, subtracts ¥5,000 for each month you have worked for them and the year-to-date deductions, works out the tax on that running total using the annual rates, and withholds the difference between that and what it has already taken.
For the salary in the table, taxable income builds up by ¥10,600 a month (¥20,000 less ¥4,400 less ¥5,000). By March the running total is ¥31,800, still inside the 3% band. In April it reaches ¥42,400: the first ¥36,000 is taxed at 3% and the remaining ¥6,400 at 10%, which is why April sits between the two rates. From May every extra ¥10,600 is taxed at 10%, and at this salary the total never reaches ¥144,000, so the payslip stays at ¥1,060 until December.
A higher salary climbs further. At ¥30,000 with ¥4,500 of social insurance, January's withholding is ¥615 and December's is ¥4,100, because the running total crosses into the 20% band in August. Take-home falls from ¥24,885 to ¥21,400 on the same gross pay. A flat salary is withheld the same amount every month only while the whole year's taxable income stays within the first ¥36,000, which means no more than ¥3,000 of taxable income a month.
Our China income tax calculator gives a resident's full-year tax at one flat monthly salary, and the monthly figure it shows is the average of the twelve payments. No single payslip carries that number, and the calculator says so. For the social-insurance figure itself, the social insurance calculator works it out by city.
That picture, twelve payments adding up to one annual bill, holds only for a steady salary from a single employer. The rest of this guide is about the situations that break it.
A job that starts in July
The ¥5,000 allowance is multiplied by the months you have worked for this employer. Someone who starts their first job of the year on 1 July at the same ¥20,000 salary would, under the base rule, have ¥3,840 withheld between July and December. Their actual tax for the year is ¥1,008, because six months of pay leaves most of the ¥60,000 annual allowance unused.
A 2020 rule closes most of that gap. Under Announcement No. 13 of 2020, an employer may count ¥5,000 for every month of the year so far, not just the months worked, for someone who has had no wage income earlier in the year. With that adjustment the July starter has ¥1,008 withheld, which is the year's tax. The rule says may, and it puts the first step on the employee: they have to tell the employer and provide evidence or a written declaration. Without it, the ¥2,832 difference comes back only at the annual reconciliation.
A change of employer halfway through
The same "this employer" wording works the other way for someone who changes jobs. Take the ¥20,000 salary, paid by one company from January to June and by another from July to December. Each employer starts its running total from zero, so each one gives the first ¥36,000 of taxable income the 3% rate. Between them they withhold ¥7,680. The year's tax on the same total pay is ¥10,200.
The ¥2,520 shortfall is the 3% band being used twice: ¥36,000 taxed at 3% instead of 10%, a second time. The 2020 adjustment does not help here, because it applies only to someone with no earlier wage income in the year. The balance is settled at reconciliation.
A bonus one yuan over the line
An annual one-off bonus (全年一次性奖金) can be taxed on its own rather than added to the year's wages. Under Ministry of Finance and STA Announcement No. 30 of 2023, the bonus is divided by twelve to choose a rate from the monthly table, and the tax is the whole bonus times that rate, less the monthly quick deduction (速算扣除数). The taxpayer may instead choose to merge it with their wages. As at 27 September 2026 the separate method runs to 31 December 2027.
Because the quick deduction is subtracted once from a sum twelve times larger, crossing a band edge by one yuan reprices the whole bonus. A ¥36,000 bonus is taxed ¥1,080. A ¥36,001 bonus is taxed ¥3,390.10 and leaves ¥2,309.10 less in hand. Chinese tax sites publish this cliff widely; it follows directly from the formula.
Which method comes out lower depends on the rest of the year. For someone on ¥20,000 a month with ¥4,400 of social insurance and a ¥60,000 bonus, the separate method gives ¥15,990 for the year against ¥20,520 merged. For someone on ¥5,000 with ¥800 of social insurance and a ¥30,000 bonus, it runs the other way: ¥900 separate against ¥612 merged, because the lower salary leaves part of the ¥60,000 allowance and the 3% band unused, and merging lets the bonus fill them. The employer applies a method when it pays the bonus; the taxpayer can choose at reconciliation.
A deduction the employer never saw
Withholding is based only on deductions the employer knows about. Some, like the one for serious-illness medical costs (大病医疗), can be claimed only during the annual reconciliation: out-of-pocket costs within the basic medical insurance list above ¥15,000 in the year can be deducted, up to ¥80,000, only when you file (State Council notice No. 41 of 2018, article 11).
For the ¥20,000 salary, ¥30,000 of qualifying medical costs makes ¥15,000 deductible. The year's taxable income falls from ¥127,200 to ¥112,200, the tax from ¥10,200 to ¥8,700, and ¥1,500 is due back. The same happens with any special deduction not given to the employer during the year, and with contributions to a personal pension, which can be deducted up to ¥12,000 a year. A refund is never paid during the year: when the running total goes negative, Announcement No. 61 says the employer refunds nothing for now.
Three special deductions were raised from 1 January 2023: children's education and care for a child under three are ¥2,000 per child per month, and support for elderly parents is ¥3,000 a month for an only child.
Someone who is not a tax resident
"Resident" here is a tax status, not a visa. The law treats someone as a resident if they have a domicile in China, or spend 183 days or more there in the calendar year. For a non-resident the law takes ¥5,000 from each month's wages and taxes the rest on a monthly table, and there is no annual reconciliation.
The monthly table is the annual one divided by twelve exactly, band edges and quick deductions alike. So twelve months of non-resident tax on a steady salary, with nothing else deducted, equals the resident's annual tax on the same pay. What differs is what can be deducted: the statute's non-resident formula names only the ¥5,000. A non-resident's bonus is also spread over six months rather than twelve, once a year (Announcement No. 35 of 2019).
Tax treaties add their own 183-day test. The China–Singapore treaty counts days in any twelve months, not the calendar year, which is a different window from the domestic rule. Our guide to working across borders in the region covers how those windows work; whether either test applies to a particular person is a question for their employer and the tax bureau.
The spring settlement for this salary
The annual reconciliation (年度汇算) runs from 1 March to 30 June of the following year. Under STA Order No. 57, filing is not needed when the tax already withheld matches the year's tax, or when a refund is due and you choose not to claim it. A separate exemption excuses a top-up when the year's comprehensive income is ¥120,000 or less, or the top-up is ¥400 or less, for tax years 2024 to 2027, unless an employer failed to withhold. A refund goes to a bank account opened in China. What was withheld and declared in your name can be checked in the Individual Income Tax app (个人所得税 App), and the tax service line is 12366.
The job-changer in the example owes ¥2,520, above both limits, so that balance is paid in spring. The July starter without the adjustment and the patient with ¥30,000 of medical costs are owed ¥2,832 and ¥1,500. And the ¥20,000 salary at the top, paid by one employer all year with nothing claimed late, was withheld ¥10,200 against a tax of ¥10,200. Its balance in spring is zero.
