Tax Policy on Annual Bonuses to Continue
China’s Ministry of Finance and State Administration of Taxation (SAT) announced on 18 August that the current tax treatment of annual lump-sum bonuses is to continue until the end of 2027.
Under this policy, an annual bonus amount is excluded from the employee’s comprehensive income for the current year, that is the income on which the applicable individual income tax rate and quick deduction are calculated. Instead the bonus amount is divided into monthly parts for the purpose of tax treatment, and subject to tax at the monthly applicable tax rate.