Job Discussion Forums

[Itsme]

In looking at the list of tax rates I don't understand how the "deduction factor of fast calculation" works. For example, according to the chart 0-500 RMB is to be taxed at 5% which would be 25 RMB. But according to the deduction factor the amount is zero.

So let's say that after deductions, I must pay taxes on 2000 RMB.

0-500 = 5%
500-2000 = 10% tax rate.

In looking at the table, I might figure that I owe 25+150= 175 RMB as tax.
In looking at the table, I might also figure that I owe 25 RMB?

So which is it? It's logical that the first figure is acurate so why throw in the "fast calculation" part, which does not make sense to me... so please enlighten me.

[tw]

Last month, the FAO assistant here in charge of FTs' pay showed me this chart which was supposed to be according to Changchun government's regulations. I didn't write down what was on the chart, but his calculationmade sense. We get 10 RMB taken out of our monthly pay every month. The tax rate from 0 - ??? RMB is 5%. The RMB amount is the amount that exceeds the tax-free level, which I believe is set at 4800 RMB. So, that makes 5% of 200 RMB = 10 RMB.

[ymmv]

If your taxable income, after deductions (including the 4800 standard deduction for foreigners) is 2000, then your tax due is 175 RMB.

If you have the table, you can calculate it one of two ways:
500 of the 2000 is taxed at the 5% rate (=25) and the remaining 1500 taked at the 10% rate (=150) for a total of 175.

Or you can use the "fast calculation" method (sometimes called the "quick reckoning" method). In the tax chart, find the level of your taxable income, in this case 2000. Use the tax rate in that column, here 10%. That works out to 200. Now SUBTRACT the "fast calculation" amount shown in the last column of the tax chart for your level, in this case 25. 200 MINUS 25 = 175.

Sounds to me as if you were adding the fast calculation amount rather than subtracting it.

If you understand the purpose of the fast calculation method, it becomes clear. The fast calc method is used so you don't have to do a bracket-by-bracket calculation for each portion of your income above the non-taxable amount. In your case part of your income (the first 500) falls in the 5% bracket, and the remainder in the 10% bracket. If you have a much higher salary, your taxable income may be spread over several brackets requiring a calculation for each bracket. Under the fast calc method, simply multiply your entire taxable income by the highest rate and then SUBTRACT the fast calc number which adjusts the tax to take into account that some of it is being taxed at a lower rate. DO the math yourself both ways and you'll see it comes out the same.

There was a previous post on this topic a year ago and some of this is covered there:
http://www.eslcafe.com/forums/job/viewtopic.php?t=34056&start=0