Tax Benefit Policy for Annual One-Off Bonus in China

INTRODUCTION

In China, employees may receive an annual one-off bonus which can come with tax benefits. This bonus is typically given at the end of the financial year or before the Chinese New Year and is a way for companies to reward their employees for their hard work and dedication throughout the year.

The tax benefits associated with this bonus can vary depending on the specific regulations and policies set forth by the Chinese government. These benefits may include reduced tax rates, providing an incentive for both employees' income.

The policy was initiated in 2005 and scheduled to conclude on December 31, 2018 to align with the New system of Yearly accumulated Tax policy. However, It was recently announced that the policy coverage has been extended until December 31, 2027.

FAQs

Q:Are all income as bonuses are eligible for the tax benefit policy?

A: Not really. It was specified clearly the definitions of the income eligible for the tax benefit policy

In essence, only yearly one-time bonuses, annual bonuses, and 13th salaries – which are typically paid once a year as incentives – will be eligible for the Benefit Policy.

Q: How is the tax benefit being eligible onto the income?

When declaring an employee's personal taxable income as an employer and the statutory withholder, it is imperative to truthfully declare all income items in accordance with the law in order to determine the appropriate tax rate for any changes in income.

Q: Is it possible to eligible the tax benefit policy on multiple bonuses?

The annual bonus tax benefit can only be applied to one bonus once per calendar year. Therefore, if the employer declares any additional annual bonus income in subsequent years, those bonuses will no longer qualify for the tax benefit.

In Horizons portal, you will see the following options applicable to the tax benefit, while adding variable payment to the employee in China,

* Annual Bonus (China, Applicable for Tax Benefit)

* 13th month salary

Q: What is the tax rates and calculation for the one-off Bonus with Tax benefit?

The annual one-time bonus income should be divided by 12 months to determine the monthly amount.

Based on the following consolidated income tax rate table after monthly conversion, the applicable tax rate and accelerated deduction amount will be determined separately for calculation of tax payment.

The formula for calculating tax payable is: Tax payable = annual one-time bonus income/12 x applicable tax rate - quick deduction number.

#	Annual one-time bonus income converted to Monthly	Tax Rate %	Quick Deduction
1	≤ 3000	3	0
2	3000~12000	10	210
3	12000~25000	20	1410
4	25000`35000	25	2660
5	35000~55000	30	4410
6	55000~80000	35	7160
7	≥ 80000	45	15160

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Tax Benefit Policy for Annual One-Off Bonus in China