Home
Knowledge
China China Taxes Individual Income Tax Comparison of IIT between Hong Kong, China and Taiwan for 2022/2023 (2)
KNOWLEDGE|
Section II Case Analysis |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Based on the aforementioned exchange rate between HKD, RMB and NTD, after converting the employment income /salaries income and tax payable denominated in RMB and NTD into HKD, the tax payable of Mainland China, Hong Kong and Taiwan are as follows. (Maximum tax payable and tax bearing rate is marked with red):
According to Hong Kong's tax relief measures, when the tax payable is less than HK$6,000, Hong Kong residents do not need to pay taxes. Learned from the above calculation results, Hong Kong residents have the lowest income tax for the same amount of employment income than the residents in Mainland China and Taiwan. The main reason is that Hong Kong ’s personal income tax (individual income tax) can obtain higher tax allowances and more tax exemptions and deductions. In addition, the Hong Kong Inland Revenue Department has not set excessively high and complicated tax exemption conditions, so that Hong Kong residents are more likely to meet the requirements of tax exemption or deduction and enjoy various tax preferential policies more generally and easily. Compared with Taiwan and Shanghai, the tax burden of Shanghai residents is higher because although the taxpayers in mainland China have already calculated the annual consolidated tax and enjoyed special additional deductions, but in fact they cannot declare the family as the unit, and there are many restrictions on tax exemptions and deductions. For example, husband and wife cannot file a joint declaration, and when the husband or wife has no income, the taxpayer cannot obtain any allowance. For any supporting parents, the number of supporting parents is not taken into account for the special additional deduction regardless of how many dependants the taxpayers should support, the total deduction shall not exceed RMB 24,000 per person per year for all taxpayers who are the single child, the maximum deduction shall not exceed RMB 12,000 per person per year for taxpayers who are non-single child. The Taiwan tax law allows taxpayers to declare and pay individual income tax on a family basis. This method has obvious advantages when the family income is low, the parents and several children need to be supported. However, compared with Hong Kong, Taiwan ’s income tax law also has more restrictions on tax exemptions and deductions and more complex requirements, such as wealth restrictions clauses. In addition, according to the calculation results of Examples 6 and 7, in the case where the family income is high and the husband and wife have salary income, the amount of tax levied on the salary income of a taxpayer or his/her spouse computed separately and then declared and paid on a consolidated basis by the taxpayers is lower than the consolidated declaration, the tax method of computed separately is more advantageous. This is because the higher the net consolidated income obtained during the consolidated calculation, the higher the corresponding progressive tax rate and the higher the tax payable. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Case One: Single Employees |
||||||||||||||||||||||||||
|
|
1. |
No Dependant |
||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
[Example 1] The taxpayer is single without siblings, his father is 54 years old and his mother is 53 years old. |
||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(1) |
Hong Kong Residents
|
|||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(2) |
Taiwan Residents Taiwan resident taxpayer’ parents are under the age of 60, they cannot declare as dependant and need to declare the individual income tax separately. Itemized deductions of labour insurance and health insurance premiums are lower than the standard deductions, so choosing standard deductions is more beneficial to the taxpayer.
|
|||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(3) |
Shanghai Residents The taxpayer is single child and the parents do not reach 60 years old, so they cannot apply for special additional deduction for the elderly care. （a）Individual Income Tax for Salaries and Wages
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| 2. |
With Dependants |
||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
[Example 2] The taxpayer is single without siblings and lives with parents. His father is 60 years old and his mother is 58 years old. |
||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(1) |
Hong Kong Residents The taxpayer's parents have all met the age standard of the tax allowance and live together with the taxpayer. In addition to the tax allowance of dependant parents, an additional tax allowance can also be applied. The total amount of tax exemptions and deductions exceeds the annual income, and taxpayers are not required to pay taxes.
|
|||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(2) |
Taiwan Residents The taxpayer ’s father is over 60 years old and his mother is under 60 years old with no ability to support herself. Therefore, they can declare as dependants and file a tax return with the taxpayer. Both parents are under the age of 70 and all 3 people are subject to the general tax allowance of NT$ 92,000 per person. The basic living expense difference of NT $ 188,000 can be deducted from the income: Total basic living expenses-(Exemption + Standard /Itemized deduction + pre-school children deduction + Physically or mentally challenged deduction+ Savings and investment deduction + Educational tuition deduction) =196,000X3-（276,000+124,000）=188,000
|
|||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(3) |
Shanghai Residents The taxpayer is a single child, and one of the parents has reached the age of 60 and can apply for a special additional deduction for elderly care for RMB 24,000 per year. (a) Individual Income Tax for Salaries and Wages
(b) Individual Income Tax for Annual One-off Bonus
|
|||||||||||||||||||||||||||||||||||||||||||||||||
|
Case Two: Married (Single Party Earning) |
||||||||||||||||||||||
|
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
1. |
Parents Under 60 Years Old and Have Ability to Support Themselves | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
[Example 3] The taxpayer is married, and the spouse has no income. The taxpayer and the spouse are single children. The taxpayer has a child over 3 years old and lives with his parents. Father is 62 years old and mother is 58 years old. The spouse's father is 60 years old and the mother is 55 years old. |
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(1) |
Hong Kong Residents (a) The taxpayer's spouse has no work and no income. So, the married person’s allowance is applied. (b) The age of the taxpayer's parents and spouse's parents meets the tax exemption conditions. The taxpayer lives with parents, he can get an additional tax allowance for dependant parents. (c) The total amount of tax exemptions and deductions exceeds the annual salaries income, and the taxpayer is not required to pay taxes.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(2) |
Taiwan Residents (a) The taxpayer’s and spouse's mothers are under the age of 60, they cannot declare as dependant, and the taxpayer, spouse and their parents should declare individual income tax separately. (b) The taxpayer, his spouse, their child and their fathers, can apply for the general tax allowance which is NTD 92,000 per person. (c) The itemized deductions of labor insurance premiums and health insurance premiums are lower than the standard deductions, so choosing the standard deductions is beneficial to taxpayers. (d) The taxpayer can apply pre-school deduction of NTD 120,000 while one of the taxpayers’ children under 5 years old. However, the tax rate applicable to the taxpayer after applying the pre-school allowance is 20%, so the pre-school deduction cannot be used, and the net taxable income should be returned and adjusted. (e) The basic living expense difference of NT $ 152,000 can be deducted from the income: Total basic living expenses-(Exemption amount + Standard /Itemized deduction + pre-school children deduction + Physically or mentally challenged person deduction+ Savings and investment deduction + Education and tuition deduction)
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(3) |
Shanghai Residents The taxpayer is the single child, one of his parents is over 60 years old. Although the spouse's father is also over 60 years old, the number of elderly dependants is not affecting the special additional deduction. Single child can apply for a deduction of RMB 24,000 per year. The taxpayer’s child has reached the age of 3, so that the taxpayer can meet the special additional deduction standard for children’s education and can apply for a deduction of RMB 12,000 per child per year. (a) Individual Income Tax for Salaries and Wages
(c) Annual Individual Income Tax Payable (Salaries and Wages, Annual One-off Bonus)
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
|
2. |
Dependant Parents and Dependant Spouse’s Parents |
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
[Example 4] The taxpayer is married, and the spouse has no income. They all are the single child and have two children which are age 9 and age 4. The taxpayer lives with his parents, his father is 70 years old and his mother is 65 years old. The spouse's parents are over 70 years old. |
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(1) |
Hong Kong Residents
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(2) |
Taiwan Residents (a) The taxpayer, his spouse, 2 children and 4 retired parents, altogether 8 persons. Five of them can apply the general exemption of NT$ 92,000 per person, and three of them are over 70 years old and can apply for the general exemption of NT$ 138,000 per person. (b) One of the children is under 5 years old and can use the pre-school children deduction of NT$ 120,000. (c) The basic living expense difference of NT $ 326,000 can be deducted from the income: Total basic living expenses-(Exemption amount + Standard /Itemized deduction amount + pre-school children deduction + Physically or mentally challenged person deduction+ Savings and investment deduction + Education and tuition deduction)
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(3) |
Shanghai Residents
Items
Amount（RMB）
Annual Salaries and
Wages
432,000
Deductions
Basic
Exemption
60,000
Special
Deduction：Social Insurance (Individual Part)
43,077
Special
Deduction：HPF (Individual Part)
28,718
Special
Additional Deduction：
Elderly
Care（For Single Child）
24,000
Special
Additional Deduction:
Children’s
Education（Two Children）
24,000
Total
Deductions
179,795
Taxable
Income
252,205
Tax
Rate
20%
Quick
Deductions
16,920
Tax
Payable for Salaries and Wages
33,521
Items
Amount（RMB）
Annual One-off Bonus
36,000
Taxable Income
36,000
Tax Rate
3%
Quick Deduction
0
Tax Payable for Annual One-off Bonus
1,080
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
| 3. |
Supported Parents (Unsupported Spouse’s Parents) |
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
[Example 5] The taxpayer is married without siblings, and his spouse has no income. They have two children which age are 15 and 10 years old. The taxpayer does not live with his parents, his father is over 70 years old, and his mother is over 65 years old. |
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(1) |
Hong Kong Residents
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(2) |
Taiwan Residents (a) The taxpayer, his spouse, two children and two retired parents, six persons in total, in which, five can apply the general exemption of NT$ 92,000 per person, and one is over 70 years old and can apply for the general exemption of NT$ 138,000. (b) The basic living expense difference of NT $330,000 can be deducted from the income: Total basic living expenses-(Exemption + Standard /Itemized deduction + pre-school children deduction + Physically or mentally challenged person deduction+ Savings and investment deduction + Educational tuition deduction)
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(3) |
Shanghai Residents The calculation for this example is the same as [Example 4]. Please refer to [Example 4] for the tax payable. |
|||||||||||||||||||||||||||||||||||||||||||||||||||
|
Case Three：Married (Both Parties Earning) |
|||||||||||||||||||||||
|
|||||||||||||||||||||||
|
1. |
Parents Under 60 Years Old and Have Ability to Support Themselves |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
[Example 6] The taxpayer is married with one child at 3 years old, and they have the same salary. The taxpayer lives with his parents. His father is 62 years old and his mother is 58 years old. The spouse's father is 60 years old and the mother is 55 years old. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(1) |
Hong Kong Residents The taxpayer and the spouse can choose to file separate assessment or joint assessment. The Hong Kong IRD will automatically calculate the taxpayer's tax, compare the results of the two methods and choose whichever is lower. (a) If the couple files a joint assessment, details of the salaries tax payable are as below:
(b) If the couple files separate assessment, the details of salaries tax payable by the husband are as below:
(c) If the couple files separate assessment, the details of salaries tax payable by the wife are as below:
Under the above situation, no matter whether the couple chooses to file separate assessment or joint assessment, they are required to pay salaries tax. But the tax payable of HK$19,300 for separate assessment (9,300 + 10,000) is lower than the tax payable of HK$43,150 for joint assessment, the tax payable should be the lower one. The average tax payable for husband and wife is HK$9,650. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(2) |
Taiwan Residents The taxpayer and his spouse can choose to calculate the tax separately and then make a consolidated declaration, or they can choose to jointly calculate the tax and make a consolidated declaration. . The taxpayer’s and his spouse’s mothers are under the age of 60, so they cannot declare as dependants. The taxpayer, his spouse, their child and their fathers, five persons in total, the general tax allowance of NT $ 92,000 per person will be applied. The tax rate applicable to the taxpayer after applying the pre-school allowance for pre-school children is 30%, so the pre-school children deduction cannot be applied, and the net consolidated income should be adjusted. The basic living expense difference formula calculates the difference of NT $ 72,000 and can be deducted from the income: Total basic living expenses - (Exemptions + Standard / Itemized deductions + Pre-school children deduction + Physical or mentally challenged person deduction+ Savings and investment deduction + Educational tuition deduction) =196,000X5-（460,000+248,000）=272,000 (a) Joint Declaration
(b) If the couple files separate assessment, the details of salaries tax payable by the husband are as below:
(c) If the couple files separate assessment, the details of salaries tax payable by the wife are as below:
(d) If the couple files separate assessment, the total tax payable is NT $ 91,480+195,400=286,880. Comparing the tax calculation, the tax payable for separate assessment is NT$286,880 which is lower than the tax payable for joint assessment amount NT$578,600. The final tax payable is NT$ 437,800. The average tax payable for husband and wife is NT$143,440. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(3) |
Shanghai Residents The calculation of China's individual income tax does not take the family as the unit, and the taxpayers who obtain individual income shall declare the individual income tax. Both the husband and wife are single child, and all their fathers are over 60 years old, so both can apply for a special additional deduction for supporting the elderly as single child. Taxpayers can apply for a special additional deduction for children’s education of RMB 12,000 for children over the age of three. 50% will be deducted for both or 100% in full for one of them can be applied. In this example, the taxpayers deduct 50%, which is RMB 6,000. (a) Individual Income Tax for Salaries and Wages of the Husband
(b) Individual Income Tax for Annual One-off Bonus of the Husband
(c) The tax computation process and tax payable of the wife for her salaries and wages and annual one-off bonus are the same as that of the husband’s. (d) Annual Individual Income Tax Payable Borne by the Husband and Wife separately:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2. |
Dependant Parents |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
[Example 7] The taxpayer is married, the husband and wife have the same salary, and they are single child. They have two children who are 4 and 9 years old. The taxpayer lives with his parents, his father is 70 years old and his mother is 65 years old. Spouse’s parents are over 70 years old. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(1) |
Hong Kong Residents (a) If the couple files a joint assessment, details of the salaries tax payable are as below:
(b) If the couple files separate assessment, the details of salaries tax payable by the husband are as below:
(c) If the couple files separate assessment, the details of salaries tax payable by the wife are as below:
Under the above situation, if the couple chooses to file separate assessment, they are not required to pay salaries tax. Comparing the tax payable between separate assessment and joint assessment, the tax payable of HK$0 for separate assessment is lower than the tax payable of HK$10,000 for joint assessment, the tax payable should be the lower one. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(2) |
Taiwan Residents The taxpayer and his spouse can choose to calculate the tax separately and then make a consolidated declaration, or they can choose to jointly calculate the tax and make a consolidated declaration. (a) Joint Declaration The taxpayer, his spouse, two children, and four parents, eight persons in total, five of which are applicable to the general exemptions of NT $ 92,000 per person, and the other 3 persons which are aged 70 or above are applicable to NT $ 138,000 per person. The tax rate applicable to the taxpayer after applying the pre-school allowance for pre-school children is 20%, so the pre-school children deduction cannot be applied, and the net consolidated income should be adjusted. The basic living expense difference formula calculates the difference of NT $ 446,000 and can be deducted from the income: Total basic living expenses - (Exemptions + Standard / Itemized deductions + Pre-school children deduction + Physical or mentally challenged person deduction+ Savings and investment deduction + Educational tuition deduction) =196,000X8-（874,000+248,000）=446,000
(b) If the couple files separate assessment, the details of salaries tax payable by husband are as below:
(c) If the couple files separate assessment, the details of salaries tax payable by wife are as below:
(d) If the couple files separate assessment, the total tax payable is NT $ 25,050+195,400=220,450. Comparing the tax calculation, the tax payable for separate assessment is NT$220,450 which is lower than the tax payable for joint assessment amount NT$295,600. The final tax payable is NT$220,450 . The average tax payable for husband and wife is NT$110,225. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
(3) |
Shanghai Residents The calculation of China's individual income tax does not take the family as the unit, and the taxpayers who obtain individual income shall declare the individual income tax separately. Both the husband and wife are single child, and all their fathers are aged over 60, so both can apply for a special additional deduction for supporting the elderly as single child. Two children of the taxpayer are over 3 years old to meet the special additional deduction standard for children ’s education, and the taxpayer and his wife can apply for a deduction of RMB 12,000 per child for the whole year. It can be deducted in full by one or 50% respectively. In this example, the taxpayers deduct 50% or RMB 12,000. The calculation for the husband and wife to declare separately is the same as [Example 3], and the results are as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Disclaimer All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage. |
Language
close
