Year-End Bonus Tax in China: How the Separate Taxation Option Works Until 2027

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Quick answer: Until 31 December 2027, an employee who is tax resident in China can have one annual bonus taxed separately from salary. The bonus is divided by 12 to find the rate in the monthly tax table, and that rate applies to the whole bonus. This usually saves tax, but a bonus just above a bracket threshold can leave the employee with less after tax than a slightly smaller bonus.

Last updated: November 2026

China year-end bonus tax at a glance – separate taxation until 31 December 2027, the bonus divided by 12 sets the rate, a bonus of RMB 36,001 costs RMB 2,310 more tax, and the method applies once a year per employee

Year-end bonuses are common in China and are usually paid before Chinese New Year. How the bonus is taxed can make a noticeable difference to what employees take home, so employers should decide the method and the amount before payroll is run.

This guide explains how China year-end bonus tax works under the separate taxation option, when combining the bonus with salary is better, where the bracket traps are and what foreign employees should know.

The Two Ways to Tax a Year-End Bonus

A resident employee's annual one-time bonus can be taxed in one of two ways:

Method	How it works	Usually better for
Separate taxation	The bonus is divided by 12 to find the rate in the monthly table. Tax = bonus × rate − quick deduction.	Most employees, especially mid and high earners
Combined with annual income	The bonus is added to the year's salary and taxed at the annual progressive rates, after the RMB 60,000 basic deduction and other deductions.	Employees with little or no taxable salary after deductions

The separate method applies to one bonus per employee per tax year. It is available until 31 December 2027 under a 2023 announcement of the Ministry of Finance and the State Taxation Administration.

The Monthly Tax Table for the Separate Method

Divide the bonus by 12, find the matching row, then apply the rate and quick deduction to the whole bonus:

Bonus ÷ 12 (RMB)	Rate	Quick deduction (RMB)
Up to 3,000	3%	0
3,000 to 12,000	10%	210
12,000 to 25,000	20%	1,410
25,000 to 35,000	25%	2,660
35,000 to 55,000	30%	4,410
55,000 to 80,000	35%	7,160
More than 80,000	45%	15,160

For example, a bonus of RMB 120,000 gives RMB 10,000 a month, so the rate is 10%. The tax is 120,000 × 10% − 210 = RMB 11,790.

The Bracket Trap

Because the rate applies to the whole bonus, going just over a threshold raises the tax on all of it. One extra yuan can cost thousands:

A bonus of RMB 36,000 is taxed at 3%: tax of RMB 1,080.
A bonus of RMB 36,001 is taxed at 10%: 3,600.10 − 210 = tax of RMB 3,390.10.

The employee pays RMB 2,310 more tax for one extra yuan, and takes home less than with a RMB 36,000 bonus until the bonus reaches about RMB 38,567. Every threshold has a range like this:

Bonus threshold (RMB)	Range to avoid (RMB)
36,000	36,001 to 38,566
144,000	144,001 to 160,500
300,000	300,001 to 318,333
420,000	420,001 to 447,500
660,000	660,001 to 706,538
960,000	960,001 to 1,120,000

Within these ranges, the employee takes home less than with a bonus at the threshold itself. Payroll should check every bonus against them before payment.

Planning Tips for Employers

Model both methods for each employee before deciding which to use in payroll.
Keep bonuses out of the ranges just above each threshold.
Pay the annual bonus as one payment, since the separate method applies only once a year.
Tell employees which method payroll used, because they can change it in their annual reconciliation.
Budget for social insurance, since bonuses count towards the following year's contribution base.

Foreign Employees

Foreign employees who are tax resident in China, generally those in China for 183 days or more in the year, can use the same separate method. Their overall position also depends on the tax-exempt allowances for housing, children's education and language training, which are available until the end of 2027, and on the six-year rule for income from outside China.

Non-resident employees follow a different rule. A bonus covering several months is taxed on its own in the month it is paid, spread over six months to find the rate.

China Year-End Bonus Tax at a Glance

Item	What applies
Separate method available	Until 31 December 2027
How the rate is found	Bonus ÷ 12, using the monthly tax table
How often	Once per employee per tax year
Alternative	Combine the bonus with annual income
Main risk	Bonuses just above a bracket threshold
Final choice	The employee can change the method in the annual reconciliation

Our China cloud payroll service handles year-end bonuses as part of the monthly payroll, including the tax withholding and the social insurance that follow. For staff hired without a local company, our employer of record service applies the same approach.

Frequently Asked Questions

Is a 13th-month salary a year-end bonus?

Usually, yes. A 13th-month salary paid once a year can be taxed under the separate method, provided it is the employee's one annual bonus. Any other bonuses in the same year are taxed with salary.

Can a bonus be split into two payments?

It can, but only one payment can use the separate method. The other is added to salary for the month it is paid, so splitting a bonus often increases the tax.

Can the employee switch methods after payment?

Yes. Employees can choose between the two methods in their annual IIT reconciliation, which may change their final tax for the year.

What happens after 2027?

The separate method is currently available until 31 December 2027. The government has not yet announced what will apply after that date.

Do bonuses affect social insurance?

Yes. Bonuses count as wages, so they raise the average monthly wage used to set the following year's social insurance and housing fund contribution base, within the local minimum and maximum.

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