China Personal Income Tax Guide 2026

Overview — IIT for Tax Residents

Individual Income Tax (IIT) in China applies to tax residents (individuals domiciled in China or present for 183+ days in a tax year) on their worldwide income. Non-residents are taxed only on China-sourced income. The tax year runs from 1 January to 31 December. Employers withhold tax monthly via the PAYE (Pay As You Earn) system, and employees file an annual reconciliation between March and June of the following year. The State Taxation Administration (STA) administers IIT. All amounts are in Chinese Yuan (CNY).

2026 IIT Tax Brackets — Comprehensive Income

Comprehensive income (wages, salaries, remuneration for services, author's remuneration, and royalties) is aggregated annually and taxed on a progressive scale after deductions:

• Up to RMB 36,000: 3% (quick deduction 0)
• RMB 36,001–144,000: 10% (quick deduction 2,520)
• RMB 144,001–300,000: 20% (quick deduction 16,920)
• RMB 300,001–420,000: 25% (quick deduction 31,920)
• RMB 420,001–660,000: 30% (quick deduction 52,920)
• RMB 660,001–960,000: 35% (quick deduction 85,920)
• Over RMB 960,000: 45% (quick deduction 181,920)

The quick deduction is subtracted from the calculated tax to account for the progressive nature. The effective marginal rate on high earners (above RMB 960,000) is 45% on the excess portion.

Standard Deduction — RMB 5,000 per Month

Every taxpayer receives a standard deduction of RMB 5,000 per month (RMB 60,000 per year) from their comprehensive income. This is deducted automatically by the employer when calculating monthly withholding. The standard deduction is available to all taxpayers regardless of actual expenses, making the first RMB 60,000 of annual income effectively tax-free (before considering other deductions).

Special Additional Deductions

The IIT reform of 2019 introduced seven categories of special additional deductions that reduce taxable income beyond the standard deduction:

• Children's education: RMB 2,000 per child per month (deductible by either parent or split). Covers preschool through tertiary education, including overseas education. Both biological and adopted children qualify.
• Childcare for infants under 3: RMB 2,000 per child per month for children under age 3, separate from the children's education deduction.
• Continuing education: RMB 400 per month for degree programs, or RMB 3,600 per year for professional certifications (one-time deduction). Applies to adult education, vocational training, and accredited professional qualifications.
• Housing mortgage interest: RMB 1,000 per month for first-home mortgage interest. Deductible for a maximum of 240 months. Only one property per household qualifies. If both spouses have mortgages, only one can claim the deduction across all properties.
• Housing rent: Varies by city tier: RMB 1,500 per month (first-tier cities like Beijing, Shanghai, Guangzhou, Shenzhen), RMB 1,100 per month (second-tier cities), RMB 800 per month (other cities). Cannot be claimed alongside mortgage interest deduction.
• Support for elderly: RMB 3,000 per month for supporting parents aged 60+ (doubled to RMB 6,000 if single child). For non-only children, the RMB 3,000 can be split among siblings by agreement. Step-parents and adoptive parents also qualify if the taxpayer is responsible for their support.
• Medical expenses: Deduction for out-of-pocket medical expenses exceeding RMB 15,000 per year (up to RMB 80,000). Limited to expenses for the taxpayer, spouse, and minor children. Must be for basic medical insurance-covered treatments; cosmetic and elective procedures do not qualify.

Taxpayers must register their special deductions via the Ge Ren Shui Wu APP (Personal Tax APP) or through their employer. The APP pre-fills some data from government databases. Failing to register deductions in a timely manner may result in over-withholding that must be refunded during the annual reconciliation.

Monthly Withholding Calculation

Employers calculate monthly IIT withholding using the cumulative withholding method. Each month, the employer aggregates the employee's year-to-date income, subtracts the cumulative standard deduction (RMB 5,000 × months worked), cumulative special deductions (social insurance, housing fund), and cumulative special additional deductions. The cumulative taxable income is then applied to the annual progressive rate schedule to determine year-to-date tax liability, from which previously withheld amounts are subtracted. This method ensures that the annual tax burden is spread evenly across months, though it may result in lower withholding in early months and higher withholding later in the year.

Annual Reconciliation

Between 1 March and 30 June of the following year, all tax residents must file an annual IIT reconciliation (bìng huì / 综合所得年度汇算). This process aggregates all sources of comprehensive income from all employers and freelance work, applies all deductions, and calculates the final tax liability. If more tax was withheld than owed (common when changing jobs mid-year or having multiple income streams), a refund is issued. If less was withheld, the taxpayer must pay the balance. The annual reconciliation is filed through the Ge Ren Shui Wu APP or the STA website, which typically pre-fills income and withholding data from employers and banks. Taxpayers with simple tax situations (single employer, standard deductions only) can file a simplified return.

Non-Tax Residents

Non-residents (present fewer than 183 days) are taxed only on China-sourced income. They are not entitled to the special additional deductions (except for housing rent in certain circumstances for high-level foreign talent). Non-residents are taxed on a monthly basis using a simpler rate schedule without aggregation. Wages and salaries are taxed at progressive monthly rates (3–45%), while other income types (services, royalties) are taxed at a flat 20% rate (with a standard 20% expense deduction for services and author's remuneration). Non-residents do not file an annual reconciliation.

Foreigners and Tax Treaties

Foreign nationals working in China may be eligible for tax equalisation policies, including the five-year rule (foreign individuals who have been tax residents for 5+ consecutive years become taxable on their global income without exemption). China has an extensive network of double tax treaties (over 100 countries) that may reduce or exempt certain types of income. Key provisions: foreign tax credits for taxes paid abroad, exemptions for short-term visitors (< 183 days) under most treaties, and reduced withholding rates on dividends, interest, and royalties. The treaty override provisions mean that treaty benefits apply even if domestic law would otherwise tax the income.

FAQs

What is the standard deduction for IIT in 2026?

The standard deduction is RMB 5,000 per month (RMB 60,000 per year). This is automatically applied by employers when calculating monthly withholding.

Can I claim both housing mortgage interest and rent deductions?

No. You may claim either the housing mortgage interest deduction (RMB 1,000/month) or the housing rent deduction (RMB 800–1,500/month depending on city tier), but not both simultaneously. Choose the option that provides the larger deduction — typically housing rent in first-tier cities is more advantageous.

When is the annual IIT reconciliation deadline?

The annual reconciliation period runs from 1 March to 30 June of the following year. For the 2026 tax year, the deadline is 30 June 2027.

Are bonuses taxed differently?

Annual bonuses (年终奖) can be taxed under a separate method: divide the bonus by 12 months, apply the monthly IIT rate, and multiply by 12. This option is available once per year and may result in lower tax than including the bonus in comprehensive income. As of 2026, the separate bonus calculation method remains available under a transitional policy.

Do foreign nationals get special treatment?

Foreign nationals who are tax residents may be eligible for the same special additional deductions as Chinese nationals, or they may elect to claim tax-exempt allowances for housing, language training, education, and relocation expenses under a separate regime (which cannot be combined with the Chinese-style special deductions). This election is an annual choice.

Disclaimer

This guide provides general information about China's Individual Income Tax for the 2026 tax year. Tax laws and rates are subject to change. The information is based on published STA regulations and may not reflect individual circumstances. Always consult with a qualified Chinese tax advisor or the local tax bureau for advice specific to your situation. InvestmentKit does not provide tax advice.