How does China payroll tax work in 2026?
China's employer social security cost has no single national rate. It varies city by city, from around 22% in some southern cities to over 28% in Beijing, before the housing provident fund. The 45% top income tax rate kicks in above CNY 960,001 a year in taxable income. Both figures surprise most first-time China hires.
· China guide
Illustration · Shanghai, China
China employer social security is set city by city, not nationally. Rates run from around 22% to over 28% of salary, excluding the housing provident fund. You must confirm the exact rate for your employee's city before running your first payroll.
The employee pays 10.5% in social security contributions. Pension alone is 8% for the employee and 16% for the employer. These are uniform across all major cities.
Individual income tax has seven bands. The basic deduction is CNY 60,000 a year. Rates start at 3% and rise to 45% above CNY 960,001.
Payroll runs monthly. Employers must withhold income tax and file the IIT return by the 15 days of the following month.
What does an employer pay in China social security?
China has no single national employer social security rate. Each city sets its own rate under local regulations.
In major cities, the employer contribution to social insurance runs from around 22% in Guangzhou to over 28% in Beijing, excluding the housing provident fund. Add the housing fund and the total rises further. Check the rate for your specific city before building a cost model.
Employer social security in China covers five mandatory programmes. The contribution rates for the three largest cities, excluding the housing provident fund, are illustrative of the national range:
| Programme | Employer rate (all major cities) |
|---|---|
| Basic pension insurance | 16% (national uniform rate) |
| Basic medical insurance | Varies by city (typically 6% to 10%) |
| Unemployment insurance | Varies by city (typically 0.5% to 1%) |
| Work injury insurance | Varies by industry and city (typically 0.2% to 1.9%) |
| Maternity insurance | Varies by city (typically 0.5% to 1%) |
The employer pension rate of 16% is the one uniform national figure. Every other component is set locally. PwC confirms that monthly employer and employee contribution rates are governed by local rules which may vary among jurisdictions.
Monthly employer and employee social security contribution rates, applicable caps, and other specifics are governed by local rules, which may vary among local jurisdictions. Employers must obtain the specific rate schedule from the local social insurance bureau.
Source: PwC: China, People's Republic of, Individual, Other taxes (Social Security)
Housing provident fund
Employers are also required to contribute to the housing provident fund. The rate is set by the local housing authority and generally runs from 5% to 12% of the employee's wage base. It is not a social insurance contribution but it is a mandatory payroll cost. The total employer obligation in a major city, including the housing fund, can reach 33% to 40% of the salary base.
What does an employee pay in China social security?
Employees pay 10.5% in social security contributions in major cities such as Shanghai and Beijing, excluding the housing provident fund.
That total breaks down as 8% for pension, 2% for medical insurance, and 0.5% for unemployment insurance.
| Programme | Employee rate |
|---|---|
| Basic pension insurance | 8% |
| Basic medical insurance | 2% |
| Unemployment insurance | 0.5% |
| Work injury insurance | 0% (employer-only programme) |
| Maternity insurance | 0% (employer-only programme) |
The 10.5% total is confirmed for Shanghai and Beijing by PwC Worldwide Tax Summaries. Other cities may apply slightly different rates. Work injury and maternity insurance are fully funded by the employer in all cities.
Employees also contribute to the housing provident fund. The employee rate mirrors the employer rate for the same city, typically 5% to 12%. These contributions are not taxable income for the employee, which reduces the effective IIT burden on lower and mid-level earners.
Contribution base
Social security contributions are calculated on a wage base set each year by the local authority. There is an upper cap (typically three times the local average monthly wage) and a lower floor. Earnings above the cap attract no additional social security. This cap varies by city and is updated annually.
China individual income tax bands for 2026
China uses seven progressive tax bands for employment income. The standard basic deduction is CNY 60,000 a year. Income up to that amount attracts no IIT.
Rates run from 3% on the lowest band to 45% on taxable income above CNY 960,001.
| Annual taxable income (CNY, after deductions) | IIT rate |
|---|---|
| CNY 0 to CNY 36,000 | 3% |
| CNY 36,001 to CNY 144,000 | 10% |
| CNY 144,001 to CNY 300,000 | 20% |
| CNY 300,001 to CNY 420,000 | 25% |
| CNY 420,001 to CNY 660,000 | 30% |
| CNY 660,001 to CNY 960,000 | 35% |
| Above CNY 960,001 | 45% |
How the basic deduction works
The standard basic deduction of CNY 60,000 a year (CNY 5,000 per month) is subtracted before applying the bracket table. Social security contributions and the housing provident fund are also deductible. Qualified additional deductions apply for children's education, elder care, housing loan interest, and continuing education. These additional deductions reduce the taxable base further for many employees.
Expatriate employees
Foreign employees resident in China for 183 days or more in a calendar year are taxed as residents on their worldwide income. Those resident for fewer than 183 days in a year are taxed only on China-sourced income. Expatriates were historically able to claim certain tax-exempt allowances (housing, education, meals). The transition rules for these allowances ended in 2023. All employees, Chinese and foreign, now operate under the same seven-band IIT structure.
How does China IIT withholding and filing work?
Employers must withhold individual income tax from each monthly payroll and file the IIT return by the 15 days of the following month.
The filing is done through the State Taxation Administration's electronic system, commonly called the Golden Tax System. No payment or filing for a period still requires a nil return.
China payroll runs on a monthly cycle. Employers calculate, withhold, and remit IIT on an accumulative basis across the year. This means the effective withholding in each month accounts for total year-to-date earnings and deductions, not just the current month's pay. The method reduces over-withholding mid-year for many employees.
The key filing deadlines:
- File the monthly IIT withholding return by the 15 days of the following month
- Remit the IIT payable by the same deadline
- An annual IIT reconciliation is required between 1 March and 30 June for employees who meet the filing threshold
Social security filing
Social security contributions are filed separately from IIT. The employer reports and pays social insurance contributions to the local social insurance bureau each month, typically on the same or a nearby deadline. Since 2019, social security collection has progressively moved to the State Taxation Administration in many provinces, meaning tax and social security are filed through the same Golden Tax System portal in most major cities.
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Collect monthly pay data
Gather salary, bonuses, and any taxable benefits for the month. Confirm the employee's city so the correct social security rate and wage base cap apply.
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Calculate gross and deductions
Total all earnings for the month. Subtract the standard basic deduction, social security contributions, and any qualified additional deductions to arrive at monthly taxable income.
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Apply the accumulative IIT method
Calculate year-to-date taxable income, apply the seven-band IIT table, then subtract IIT already withheld this year. The result is the amount to withhold this month.
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Calculate and pay social security
Apply the city-specific employer and employee social security rates to the capped wage base. Add the housing provident fund at the locally applicable rate.
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File the monthly IIT return
Submit the withholding return through the Golden Tax System by the 15 days of the following month and remit the IIT payable by the same deadline.
Pension contributions in the China payroll stack
The employer contributes 16% of the employee's wage base to the basic pension insurance fund. The employee contributes 8%.
These rates are uniform across all major cities. The pension contribution base is capped at three times the local average monthly wage, which varies by city and is updated annually.
China's pension system has three tiers. The mandatory basic pension insurance is the only employer obligation in standard payroll. The second tier, enterprise annuity (similar to an occupational pension), is voluntary and more common at large or state-owned employers. The third tier is personal savings, fully voluntary.
How the basic pension fund works
The 16% employer contribution goes into a social pooling account managed by the local government. The 8% employee contribution goes into the employee's individual account. At retirement, the employee receives a monthly pension based on contributions from both accounts. Contributions vest from the first month of employment with no minimum service threshold.
Enterprise annuity
Employers who offer an enterprise annuity scheme contribute an additional amount (capped at 8% of the total wage bill) with employees also able to contribute up to 4% of their salary. Tax relief is available on both employer and employee contributions within the caps. Enterprise annuity is not required by law and is not part of the standard China payroll for most foreign-invested employers using an EOR.
Portability
Basic pension contributions follow the employee when they change jobs or cities. Transfer procedures are administered through the local social insurance bureau. An employee who leaves China before retirement age can apply for a lump-sum withdrawal of their individual account balance. The pooled employer contributions are not refundable to the employee.
How does Teamed handle China payroll for you?
Teamed becomes your legal employer of record in China for from $599 per employee per month, with zero FX mark-up in any currency.
Payroll, IIT withholding, social security, and the full China employment law stack run on one platform.
Real HR and legal experts handle your China hires, from the first offer letter through every monthly IIT filing and annual reconciliation. An actual person, not a chatbot or a pooled queue. China payroll has city-specific social security rates, annual filing obligations, and housing provident fund rules that differ by location. You do not need to track any of that yourself.
There is no setup fee and no exit fee. Employer cost passes through at cost, itemised on every invoice. City-by-city social security rates, housing provident fund contributions, and annual IIT reconciliation filings are all included. Run the Employer Cost Calculator to see the full picture before you make an offer.
A China hire can graduate from EOR to your own entity when volume justifies it. EOR is the right model for early China hiring, until it isn't. Start from the China hiring overview. Key sources: PwC Worldwide Tax Summaries, China and the Labour Contract Law of the People's Republic of China.
Frequently asked questions
What is the employer social security rate in China in 2026?
There is no single national rate. Employer social security is set by each city. In major cities the total, excluding the housing provident fund, runs from around 22% in Guangzhou to over 28% in Beijing. The employer pension component is uniform nationally at 16%. You must confirm the rate for your employee's specific city with the local social insurance bureau.
What social security does a China employee pay?
Employees in major cities such as Shanghai and Beijing pay 10.5% in social security contributions, excluding the housing provident fund. That breaks down as 8% pension, 2% medical insurance, and 0.5% unemployment insurance. Work injury and maternity insurance are employer-only programmes.
What are the China individual income tax bands in 2026?
China has seven IIT bands after the standard basic deduction of CNY 60,000 a year. The bands are: 3% up to CNY 36,000, 10% up to CNY 144,000, 20% up to CNY 300,000, 25% up to CNY 420,000, 30% up to CNY 660,000, 35% up to CNY 960,000, and 45% above CNY 960,001.
When must China employers file IIT withholding returns?
Employers must file the monthly IIT withholding return and remit the tax payable by the 15 days of the month following each pay period. Filing is done through the State Taxation Administration's Golden Tax System. An annual IIT reconciliation is also required, filed between 1 March and 30 June of the following year.
How does China pension work in payroll?
Employers contribute 16% to the basic pension insurance fund. Employees contribute 8%. Both rates are uniform across all major cities, making pension the only uniform component in an otherwise city-variable social security system. Contributions are based on the employee's wage, capped at three times the local average monthly wage.
The biggest China payroll mistake we see is treating social security as a fixed percentage. It is not. A company that models one rate for all Chinese cities can be off by six percentage points on employer cost. You need the rate for Beijing, a different rate for Shanghai, and a different one again for Guangzhou. We pull the correct schedule before the first offer goes out.
China's 45% top income tax rate and a city-by-city social security bill mean your China offer costs more than the salary line.
Employer pension is 16% nationally. Add local medical, unemployment, and housing fund levies, and total cost can clear 30% above base.
Run the numbers before you send the offer.
