Job Discussion Forums

[Itsme]

What do you do when a school first offers you 7000 RMB per month then says that 6500 is the MOST that it is allowed to pay by "law" and then adds on to that that 300 to 400 RMB comes out for income tax?

Is any of this legit? The income tax?

[cj750]

I would say your being had..first it the deal is 7000 and the switch is 6500 then it is likely someone putting 500 in their pocket as there is no law...

income tax would be based on taking 4800 off as a deductable which would leave a taxable amount ..... As at 2005, an individual's income is taxed progressively at 5% - 45%

at the amount you would make..around 15%

[ymmv]

1. Re: A Reduced offer from 7000 to 6500:

It's possible the school isn't really jerking you around - but only if the school in question is a university or college funded (in whole or part) by the Provincial Education Bureau, the PEB may be requiring them to follow the SAFEA "regulations" issued in 2001(guidelines really) for paying foreign experts. Candidates with doctorates and teaching experience topped out at 6500 as I recall. The 2001 guidelines were really just that: guidelines. But it may have been when the school submitted your documents to the PEB for issuance of the letter of invitation, they were told by the PEB that they wouldn't approve a salary in excess of the guidelines (possibly because all or part of the funds for your salary will be coming from the PEB and not the school itself). If that's the case, consider agreeing to the 6500 but for 2 less hours per week. It's a bargain for you (8 less hours for 500 less RMB). If the school really wants you and they're hamstrung by the "guidelines", they'll go along with that. And the PEB will probably issue the letter. They're looking at the RMB number primarily, not the hours.

2. The withholding tax on a 6500 RMB salary WILL BE EXACTLY 145 RMB.
It's very possible that the school has, in the past, never had to pay withholding on a foreign teacher because they had only bachelor degree teachers and never paid more than 4000 (4800 after January 1st this year). If that's the case, the FAO or whomever you were dealing with was probably ball-parking the tax. Have him check with the accounting department to find out the exact amount of tax payable. (The answer he gets will be 145 RMB.)

My source: http://www.ey.com/GLOBAL/content.nsf/China_E/Media_Center_-_News-12-06-2003

(Though the article is from 2003 and before the exemption amount was raised in January of this year, the calculation is the same. Just substitute the current 4800 RMB standard deduction for foreigners, for the 4000 RMB standard deduction which was in effect at the time the article was written. Use the "Non-Gross Up Method - Example 2".)

Example 1 (Gross-Up Method) is only used if you can get the school to agree, as part of your contract, to pay your taxes for you. Actually, if they won't budge on the reduced offer of 6500, you can get some face back (and an additional 145 RMB a month) by accepting their offer of 6500 as after-tax. It's not much, but they'll have to kick in a bit of their own money (the tax) to the 6500 the PEB gives them, but if they really want you, they'll do it. BTW, the tax cost to them of doing it that way, (just so you have the numbers in your head when you negotiate) would be 142.22 RMB. (Method #1). So if the school really wants you, they'll throw an additional 142.22 from their own funds in to pay the taxes.

In the best of all possible scenarios, assuming the school is being on the up and up with you, you get an after-tax salary of 6500 for 12 hours.

Oh, and make sure you add a provision in the contract - if you agree to go with it - that they provide a withholding tax receipt when they pay you on payday every month - whichever way you agree on how the taxes are paid.

Happy negotiating and good luck!

[WordUp]

ymmv: your tax calculation was based on 2003 data, since January of 2006 the min tax threshold was improved to 4800 RMB..

The tax would be 255 RMB @ 6500 and 375 @ 7,000

6500 - 4800 = 1700 x .15 (15%) = 255 RMB

6500 - 255 = 6,245 RMB

How many periods are you working on this salary and what type of city is it? Large? Medium? Is housing, utils included?

http://journeyeast.org/financial_considerations.htm

[ymmv]

[cj750]

Even though the deductions are the same...the tax laws allow several different methods of calculating and if you have a problem with the method for calculation, it takes a trip to the tax office to have them approve or disapprove the method the company uses...and PSB has no say in salary amounts as it would fall under the Employment and Labor board....that is if the guidelines were regulation...they are not...

[ymmv]

[cj750]

Good then we are in agreement then... no kidding...my mistake....