> Since the teacher only is paid 360k CASH in their contract, this result in
> a yearly take home pay of 155k rmb or approximately 12750rmb/month after
> the full taxation is deducted. I just ran all the figures into a spread
> sheet and used the regulations as I understand them over many years.
> 680k - 56k/month
> 7500rmb tax free
> 49k taxable at 35%
> 17k tax/month - 200k rmb tax/year
> 360k rmb cash - 200k rmb rax = 160k/year
> or about 13k cash into the bank/month!
I'm afraid you are not calculating the tax correctly. The 49k per month is not entirely taxed at 35%. Most of it is taxed at lower bands and only the top part is taxed at 30% (the amount is not high enough to reach the 35% band). The correct calculation is shown in my Scenario 2 on the previous page.
Taxable income = 680,000/yr = 56,667/mth
Tax free allowances = 90,000/yr = 7,500/mth
Tax basis = 590,000/yr = 49,167/mth
Tax payable calculated across the different tax rate bands
(590,000 - 420,000) x 30% = 51,000
(420,000 - 300,000) x 25% = 30,000
(300,000 - 144,000) x 20% = 31,200
(144,000 - 36,000) x 10% = 10,800
(36,000 - 0) x 3% = 1,080
Total tax payable = 124,080/yr = 10,340/mth
Effective average tax rate = 124,080/680,000 = 18.2%
Gross cash = 360,000/yr = 30,000/mth
Net cash = 235,920/yr = 19,660/mth
Of course the net cash received at 19,660/mth is still significantly reduced (from original 26,410/mth), but it is nowhere near your incorrect figure of 12,750/mth.
The local tax office in Shanghai does not use the incremental tax bands, they just work out the monthly average and use that to make their deductions. At the end of the year you use the tax app on your mobile to claim back at tax refund.
We only have one payday left now before January! Only then can we be sure what is going to happen.
Maybe the schools will send out "wechat" payments to cover the additional taxation to hide it from the taxation!
Whether those plans actually happen remains to be seen. Ive heard variations that ISs will cover the additional tax for the rest of this year but only if the IT renews.
https://www.swisscham.org/wp-content/up ... ontagi.pdf
The 30% tax band starts at 420k and the 35% starts at 660k and for every thing you earn that is the taxation deduction.
A salary of 30k/month and rent allowance at 8k/month already pushes you into 30% tax band, plus two kids at 160k tuition fees puts you over the 35% threshold.
If your combined salary/Allowance add up to 52920rmb /month you will move from the 25 to 30% tax band.
Uncertainty still applies as to how the new taxation rates will be calculated, but the method a graduated steps in differing tax percentage the more you earn looks likely.