No fuss over new personal tax rules
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China Daily, July 29, 2011
For some foreigners working in China, the country's newly amended income tax law will bring some initial joy that may turn to disappointment.
While the monthly personal income tax threshold for foreign employees has been raised at the same rate as that for their Chinese counterparts, limits to the deductions they will be allowed will result in their being taxed at the same rate as they were before the changes, or even more in the case of high-income earners.
The monthly tax threshold for foreigners has been raised by 1,500 yuan ($230) to 3,500 yuan, the same as for Chinese taxpayers. However, the deductions for expenses, a special subsidy for foreigners, have been reduced by the same amount, 1,500 yuan, to 1,300.
A simple calculation shows that the tax threshold remains the same, at 4,800 yuan.
Tax agency Beijing Jingdu CPAs did further calculations and found the thresholds for when people will have to pay more tax after the amendment.
If you are a foreigner and earn more than 41,400 yuan a month, prepare to be taxed more heavily.
The agency found that under the new rules, which were issued by the State Council on Wednesday and will take effect on Sept 1, if a foreigner earns 62,000 yuan a month, he or she will be taxed an extra 205 yuan a month.
But most foreigners do not seem to care about how much tax they pay in China.
John Mellors, from the United Kingdom, said he has not tried to determine what impact the policy change 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," said Mellors, who has been working for an insurance company in Shanghai for eight years. "The change is small, so we don't care about it so much."
Zhang Shuguang, an economist with the Unirule Institute of Economics, described the changes as more symbolic than practical.
"It can neither help adjust unbalanced income distribution, nor release purchasing power. It just helps the people to vent their anger," he said.
