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Salary delay is more taxing
By Lydia Chen |
September 8, 2011, Thursday
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Print Edition
Print Edition
TAXPAYERS who may be thinking of paying less income tax under China's new calculation method, which started on September 1, by getting their companies to delay paying their August salary to this month have been told by the tax authority to think twice.
The State Administration of Taxation pointed out that they are not likely to pay less income tax by adopting this move, according to a report posted on its website yesterday.
On September 1, China raised the threshold at which personal income tax is payable to 3,500 yuan (US$539) from 2,000 yuan and cut the tax brackets to seven from nine, with rates ranging from 3 percent to 45 percent.
Under the new system, a taxpayer whose salary is between 8,000 yuan and 12,000 yuan per month will pay 480 yuan less tax after deducting social welfare contributions. Those earning 19,000 yuan monthly will pay 155 yuan less tax, and those earning 30,000 will find a net increase of just 5 yuan more in their pockets.
For employees who are hoping to take advantage of the new calculation method by getting two months' salary in September under the mistaken impression of paying less tax, the SAT said the income tax should then be calculated based on two months' salary.
For instance, if the person earns 10,000 yuan per month and he delayed his August salary to September, The SAT will calculate his income tax based on 20,000 yuan.
After deducting the 3,500 yuan threshold amount, the balance of 16,500 yuan is taxable. Under the new calculation formula, the taxpayer will pay income tax of 3,120 yuan.
But if the person gets just his 10,000 yuan salary in September, he only pays 745 yuan income tax under the new calculation.
If he took his August salary under the old tax calculation, his income tax was 1,225 yuan for last month. So his total tax would be 1,970 yuan, lower than the 3,120 yuan tax.
The State Administration of Taxation pointed out that they are not likely to pay less income tax by adopting this move, according to a report posted on its website yesterday.
On September 1, China raised the threshold at which personal income tax is payable to 3,500 yuan (US$539) from 2,000 yuan and cut the tax brackets to seven from nine, with rates ranging from 3 percent to 45 percent.
Under the new system, a taxpayer whose salary is between 8,000 yuan and 12,000 yuan per month will pay 480 yuan less tax after deducting social welfare contributions. Those earning 19,000 yuan monthly will pay 155 yuan less tax, and those earning 30,000 will find a net increase of just 5 yuan more in their pockets.
For employees who are hoping to take advantage of the new calculation method by getting two months' salary in September under the mistaken impression of paying less tax, the SAT said the income tax should then be calculated based on two months' salary.
For instance, if the person earns 10,000 yuan per month and he delayed his August salary to September, The SAT will calculate his income tax based on 20,000 yuan.
After deducting the 3,500 yuan threshold amount, the balance of 16,500 yuan is taxable. Under the new calculation formula, the taxpayer will pay income tax of 3,120 yuan.
But if the person gets just his 10,000 yuan salary in September, he only pays 745 yuan income tax under the new calculation.
If he took his August salary under the old tax calculation, his income tax was 1,225 yuan for last month. So his total tax would be 1,970 yuan, lower than the 3,120 yuan tax.
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