The Chinese Ministry of Finance (MOF) says that the 5,000 yuan (approx. USD$732.05) minimum threshold for personal income tax will be subject to “dynamic adjustment” in future.
China’s top legislative authority voted at the end of August to raise the minimum income tax threshold to 5,000 yuan per month from 3,500 yuan previously.
The amended personal income tax will come into effect on 1 January 2019, while the starting from October 1 of this year the minimum threshold for exemption from fees will also be raised to 5,000 yuan, and taxes calculated on the basis of the new schedule.
At a press conference held on 31 August MOF vice-minister Cheng Lihua (程丽华) said that the setting of a 5,000 yuan threshold was based on broad consideration of several factors including the basic consumption expenditures of China’s urban residents, the consumer price index as well as the average number of dependents for each wage earner.
Data from the National Bureau of Statistics (NBS) indicate that the average monthly expenditures of China’s urban wage earners was 3,900 yuan in 2017, a figure which is expected to rise to 4,200 yuan in 2018 based on the average growth rate over the past several years.
Cheng said that the setting of a 5,000 yuan covered current per capita expenditures while also leaving significant room for for changes ahead.
The MOF vice-minister also said that the 5,000 yuan threshold was not “fixed and unchanging,” but would be subject to “dynamic adjustment” based on further reforms of the personal income tax system in China, as well as changes in the average basic expenditures of urban residents.