Check income tax on termination compensation: the source describes an exemption up to three times the local previous-year average wage

Cost: No monetary cost. Check the local previous-year average employee wage and spend a few minutes reviewing the employer's tax withholding. Individual income declarations can be viewed in China's Individual Income Tax app.

In plain language: The source describes a tax exemption for the portion of one-off compensation for ending an employment relationship up to three times the local previous-year average employee wage. The excess is taxed separately rather than added to that year's wages. If the employer included the entire payment in monthly wages for withholding, first ask the employer for clarification, then contact the tax authority through 12366.

Rules and example reported by the source: The finance and tax authorities' document covers one-off termination-related income including economic compensation, living allowances and other subsidies. The portion within the three-times threshold is exempt from individual income tax; the excess is taxed separately using the comprehensive-income rate table. The source describes annual brackets beginning at 3% on the first 36,000 yuan and 10% between 36,000 and 144,000 yuan, rising to 45% at higher levels. In its example, a local previous-year average wage of 100,000 yuan gives an exempt threshold of 300,000 yuan. For compensation of 360,000 yuan, tax on the excess 60,000 yuan is 3,480 yuan; applying the table to the entire 360,000 yuan would instead give 58,080 yuan. The source says this termination provision took effect on January 1, 2019, without specifying an expiry date. Scope: China.

Source author's evidence grade: A; not site verification or professional approval.

Notes: The separate annual-bonus provision in the same document had an expiry date later extended to December 31, 2027; the source distinguishes that from the termination-compensation provision. The document names economic compensation, living allowances and other subsidies, without separately naming payment in lieu of notice or damages for unlawful termination. Ask the local tax authority through 12366 about uncertain treatment and which local average-wage figure to use. For calculating compensation, see this chapter's entries 4, 5 and 6 on dismissal compensation, lack of 30 days' notice and unlawful termination. One-off payments for early retirement or internal retirement follow different calculations and are outside this entry.

Original source bibliography (titles retained as supplied): 财政部、税务总局 (2018). 关于个人所得税法修改后有关优惠政策衔接问题的通知（财税〔2018〕164 号，第五条第（一）项、第八条、第九条）. https://fgk.chinatax.gov.cn/zcfgk/c102416/c5202364/content.html（国家税务总局政策法规库）；财政部、税务总局 (2023). 关于延续实施全年一次性奖金个人所得税政策的公告（2023 年第 30 号）. https://fgk.chinatax.gov.cn/zcfgk/c102416/c5211524/content.html（国家税务总局政策法规库）；全国人大常委会 (2018 修正). 个人所得税法（第三、九条，个人所得税税率表一）. https://flk.npc.gov.cn/detail?id=2c909fdd678bf17901678bf724bd0609