Working in a technological research enterprise, the income of a man surnamed Zhang has remained steady for a long time. However, he found that his recent pay slip indicated a significant change in personal income tax (PIT) payment. As the administration explained, the adjustment of tax calculation methods has resulted in changes to PIT payment, the Southern Metropolis Daily reported.
Zhang said that his income before tax is around 17,000 yuan (US$2,470). He paid 210 yuan in PIT in January, but the amount rapidly rose to 630 yuan in June, which is three times greater, and his latest pay slip showed his PIT continued to rise to 700 yuan.
Staff at Shenzhen Tax Administration said that according to the new PIT law, which went into effect Jan. 1, PIT will no longer be collected on a monthly basis, but instead will first be calculated based on the taxpayer’s current total income and collected afterwards, which means when the total income increases, the tax rate, along with the PIT, increases.
The cumulative withholding method entails cumulating the monthly withholding and reducing the additional deduction, and then based on the corresponding tax rate, deducting the tax payment that has already been withheld.
According to the new calculation method, the tax rate applied to Zhang would initially be 3 percent, since the sum of his taxable income in the first five months of the year does not reach 36,000 yuan. However, the rate increases to 10 percent afterwards because his total taxable income has exceeded 36,000 yuan by that point.
The tax rate for the working class in Shenzhen normally stays within the first three levels, namely 3 percent, 10 percent, and 20 percent, observed by the Southern Metropolis Daily.
A financial expert explained that the change in PIT payment does not increase the amount paid in taxes. The new method enables taxpayers an unstinted cash flow during the first few low-rate months.