China individual income tax for employees: rates, deductions and social insurance
Take off CNY 60,000, your social insurance, housing fund and special deductions, then apply rates from 3% to 45%. How China taxes salaries, with Shanghai examples.
China taxes a resident's salary as part of "comprehensive income" for the year. Employers withhold individual income tax (IIT) each month on a cumulative basis, so the monthly tax rises as the year goes on, but the total for the year follows one set of rates. Understanding the deductions is the key to knowing your take-home pay. This guide explains China's individual income tax rates for employees in 2026, what you can deduct, how social insurance and the housing fund work, and how much you keep, with worked examples.
What comes off before tax
Standard deduction. Every resident taxpayer can deduct CNY 60,000 a year, or CNY 5,000 a month. This is often called the basic tax-free allowance.
Social insurance and housing fund. Your own contributions are deductible. In Shanghai, employees pay 8% for pension, 2% for medical insurance and 0.5% for unemployment insurance, on a contribution base of CNY 7,546 to CNY 37,731 a month from 1 July 2026. Employees also pay 5% to 7% of the same base to the housing provident fund, matched by the employer. Other cities use different bases and slightly different rates; read our guide to China's five insurances and the housing provident fund.
Special additional deductions. These recognise family costs. You can deduct CNY 2,000 a month for each child in education or under three, up to CNY 3,000 a month for supporting elderly parents, CNY 1,000 a month for first-home mortgage interest, or CNY 800 to 1,500 a month for rent depending on the city. There are also deductions for continuing education and for serious illness medical costs. You claim them through the Individual Income Tax app.
China individual income tax rates
After deductions, annual taxable income is taxed at progressive rates:
- Up to CNY 36,000: 3%
- CNY 36,000 to 144,000: 10%
- CNY 144,000 to 300,000: 20%
- CNY 300,000 to 420,000: 25%
- CNY 420,000 to 660,000: 30%
- CNY 660,000 to 960,000: 35%
- Above CNY 960,000: 45%
Each rate applies only to the slice of income in its band.
Worked examples (Shanghai, 7% housing fund)
Salary of CNY 120,000 a year. Social insurance is CNY 12,600 and the housing fund CNY 8,400. After the CNY 60,000 standard deduction, taxable income is CNY 39,000. IIT is 3% of CNY 36,000 plus 10% of CNY 3,000, which is CNY 1,380. Take-home pay is CNY 97,620.
Salary of CNY 240,000 a year. Social insurance is CNY 25,200 and the housing fund CNY 16,800, giving taxable income of CNY 138,000 and IIT of CNY 11,280. Take-home pay is CNY 186,720. With one child, which adds a deduction of CNY 24,000 a year, IIT falls to CNY 8,880.
Annual bonuses can be taxed separately under a special rule, which is not included here. Try your own figures, or enter another city's contribution rates, in our China salary tax calculator.
Why monthly tax rises during the year
Because withholding is cumulative, your employer calculates the tax due on your total income so far this year and subtracts the tax already withheld. In January only the lowest rate applies, but by late in the year your cumulative income may reach the 10% or 20% band, so your monthly tax goes up even though your salary has not changed. This is normal and evens out over the year.
The annual reconciliation
Between 1 March and 30 June each year, taxpayers can file an annual IIT reconciliation for the previous year through the Individual Income Tax app. It brings together salary, labour fees and other comprehensive income, and lets you claim any deductions you missed. Many people receive a refund. Our guide to China's annual IIT reconciliation explains the steps.
Ways to lower your tax
Make sure every special additional deduction you qualify for is entered in the app. Contributions to the personal pension scheme are also deductible up to CNY 12,000 a year; see our guide to China's personal pension.
Frequently asked questions
What is the tax-free allowance in China?
CNY 60,000 a year, or CNY 5,000 a month, for resident taxpayers.
Are social insurance contributions tax-deductible in China?
Yes. Your own social insurance and housing fund contributions are deducted before tax.
What is the top IIT rate in China?
45%, on annual taxable income above CNY 960,000.
Sources
This article is general information, not financial advice.