What the law says
The figures below are the 2026 rules as the calculator models them, for an employee in Shanghai. You are a tax resident in China if you have a home there or you spend 183 days or more in a tax year in China. Residents are taxed on salary from work in China under one annual scale, called comprehensive income. Tax is withheld every month by your employer, then settled in the following year's annual reconciliation.
Individual income tax rates
The same annual scale applies to everyone. Taxable income is your salary less the CN¥60,000 basic deduction (CN¥5,000 a month), your social insurance and housing fund contributions, and either special additional deductions (for local employees) or tax-free allowances (for expats, see below).
| Annual taxable income | Rate |
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| Up to CN¥36,000 | 3% |
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| CN¥36,001 to CN¥144,000 | 10% |
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| CN¥144,001 to CN¥300,000 | 20% |
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| CN¥300,001 to CN¥420,000 | 25% |
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| CN¥420,001 to CN¥660,000 | 30% |
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| CN¥660,001 to CN¥960,000 | 35% |
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| Over CN¥960,000 | 45% |
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Social insurance and the housing fund
The employee's share in Shanghai is 8% for pension, 2% for medical and 0.5% for unemployment insurance, a total of 10.5%. The calculator applies them to monthly pay between a floor and a ceiling (about CN¥37,300 to CN¥37,700 a month at the top), so very high earners stop paying more. The housing fund is a savings scheme where you and your employer each contribute, and the calculator assumes 7% on the same ceiling, which you can change. Check with your employer whether the housing fund applies to you. These contributions come off taxable income.
Expat tax-free allowances and special deductions
Local employees can claim special additional deductions, such as for children's education, continuing education, housing loan interest or rent, and care of elderly parents. A foreign employee may instead take tax-free allowances for items such as housing, language training and children's schooling, when the employer pays them under the rules. Under the notice the calculator cites (MOF and STA 2023, No. 29), an expat chooses one of the two, and not both, with the choice open until the end of 2027. The calculator follows this: an expat's allowances are a figure you enter, and special deductions are not applied.
Monthly cumulative withholding
Your employer withholds tax every month by adding up your pay from 1 January, taking off the basic deduction and your other deductions so far, applying the annual scale to the running total, and subtracting what has already been withheld. In January the tax is low, and it steps up as your cumulative income crosses a bracket. The calculator shows the final full-year amount, which is what the annual reconciliation settles.
How to pay less tax, legally
These are mainstream, legal ways to reduce Chinese tax. Which ones apply depends on your status and your employer.
Use the special additional deductions at the annual reconciliation
Suits: local employees, and foreign employees who choose deductions rather than allowances. Deductions for children's education, continuing education, housing rent or mortgage interest, and elderly parents lower taxable income. You declare them in the tax app, and your employer applies them to withholding.
Caveat: each deduction has its own conditions and limits, and you cannot take them together with the expat allowances.
Take the expat tax-free allowances while they last
Suits: foreign employees whose employer pays for housing, language training or children's education. Allowances paid within the rules are tax-free, which may beat the standard deductions.
Caveat: you must choose one or the other, and the choice is tied to the notice that runs to the end of 2027. Get written confirmation from your employer of what is paid and how it is documented.
File the annual reconciliation and claim the refund
Suits: anyone whose monthly withholding is higher than the final tax, such as a person who started mid-year or who has deductions not yet applied. The filing window runs from 1 March to 30 June.
Caveat: you owe the difference if the withholding was too low, and you need your tax ID. File on time to avoid a penalty.
Check the housing fund and its withdrawal rules
Suits: employees whose employer offers the housing fund. Contributions are deducted from taxable income, so they save tax, and the money is yours.
Caveat: withdrawal is limited to listed purposes such as housing or leaving the country, depending on the city. Ask the local fund centre what applies to foreign employees.
Frequently asked questions
How much tax do I pay on CN¥360,000 in Shanghai?
A local employee pays about CN¥30,480 in income tax, plus CN¥37,800 of social insurance and CN¥25,200 for the housing fund, and keeps about CN¥266,520. Try your own figure in the Global Income Tax Calculator.
What is cumulative withholding, and why does my tax change month to month in China?
Your employer adds up your pay from 1 January and applies the annual rate scale to the running total, minus what has already been withheld. In the early months your cumulative taxable income sits in a low bracket, so the tax is small. As the total climbs into a higher bracket, the monthly tax rises, and your take-home pay for the same salary falls later in the year. A person who started mid-year, or whose pay changes, can see the shape change.
The calculator shows the full-year figure, so each payslip will differ from it.
Do I have to file an annual tax reconciliation in China?
The annual reconciliation runs from 1 March to 30 June for the previous year. It compares the tax withheld through the year with the tax you owe for the whole year, and you receive a refund or pay the difference. The rules say who has to file, for example when your income is above a threshold and you owe more than a small amount, so check the current conditions on the State Taxation Administration site or in the official tax app. Filing is also the way to claim a refund.
What happens to the expat tax-free allowances?
Foreign employees were allowed to take tax-free allowances for housing, language training, children's education and similar items. A transition policy lets expats keep a choice between these allowances and the special additional deductions. The notice the calculator uses runs to the end of 2027, and what follows is not settled in the calculator. The tool treats allowances as an amount you enter, so you can compare with and without.
Do foreigners pay Chinese social insurance?
Foreign employees who work in China under a contract are generally required to join social insurance, with employer and employee shares, and the calculator includes it. Some countries have agreements that exempt their citizens for a period. Check with your employer and with the local social insurance bureau.
Why is my marginal rate on CN¥360,000 higher than 20%?
The pension, medical and housing fund contributions grow with pay until the ceiling, so an extra yuan of salary also adds contributions. In the calculator, 17.5% goes to contributions and 20% tax applies to the remaining 82.5%, which gives about 34%. Above the ceiling, as for the expat example, contributions stop rising and the marginal rate falls back to the tax rate alone (25%).