Lowtax Network

Back To Top

Your Lowtax Account

China: Wealth Management

Tax System and Wealth

Permanent residents are subject to tax on their world-wide income. Non-residents and residents who have not yet become permanent (the first five years of residence) pay tax on their China-source income; but the residence qualifications are a bit hazy, especially for people of Chinese origin.

Income is defined very broadly, but excludes interest on bank deposits. There are personal allowances, which are higher for foreign individuals. Tax rates vary from 5% to a maximum of 45% on monthly earned income over RMB80,000. There is capital gains tax of 20%, and the same rate applies to many types of unearned income. Employers operate a 'PAYE' withholding tax system for tax on salaries and social security contributions, which bear more heavily on employers (20% of payroll) than on employees (7%).

Withholding tax of 10% applies to dividends, interest, royalties and capital gains.

Clearly this is a taxation environment which is not appealing to richer people. There are plenty of those: there are thought to be more than 900,000 dollar millionaires in China, and the country has more billionaires than any country other than the US.

Although the rapid expansion of China's economy and especially its international links have left the authorities struggling to keep up in terms of tax collection, and have presented richer people with multiple opportunities to transfer or create wealth abroad rather than in China, there is still considerable and growing demand from within the country for legitimate channels to preserve wealth from a government which is after all still nominally socialist or worse, and certainly can't be termed 'wealth-friendly'.

 

 

Back to China Index »

Back to top