Individual Income Tax for Foreign Individuals in China
Digest of “Regulations on the Implementation of the Individual Income Tax of P. R. China”
1. What Kind of Foreign Individuals Shall Pay Individual Income Tax in China?
1.1 Foreigners and residents of the regions of Hong Kong, Macau and Taiwan (hereinafter referred to as “Foreign Individuals”) who derive income from work or employment with enterprises or organizations within the territory of China.
1.2 Foreign individuals who derive income from personal services provided (including design work, shows, performances, advisory positions, brokerage services, agency services, etc.)
1.3 Foreign individuals who derive income from author’s remuneration, royalties, interest, dividends, bonuses, the lease of property, transfer of property, contingent income and income from other sources inside China.
Any non-Chinese passport holder working for a local company, a foreign company’s representative office, subs-company in China, or a Wholly Foreign Owned Enterprise in China, that person needs to pay his income tax to Chinese tax administration. In short, if the entity which you working for is registered in China, you should pay relating income tax.
2. How to Determine the Source Location of Wages and Salaries for Foreign Individuals?
For the wages and salaries derived by the foreign individuals, the place where he/she works is considered the source of income. The location of payment is not relevant in determining the income source.
In other words, wages and salaries derived by the foreign individual for work while inside China will be considered as China-based income, regardless of whether they are paid by enterprises or individuals inside or outside China. Wages and salaries derived by the foreign individual for work while outside China will be considered as income based outside China, regardless of whether they are paid by enterprises or individuals inside or outside China.
3. Tax Liabilities for Foreign Individuals According to the Different Living Time in China.
3.1 Individuals who are neither domiciled nor resident in China, or who are not domiciled and reside for less than one year in China, shall pay individual income tax for income derived from China.
3.2 Non-resident taxpayers working in China for less than 90 days or those from tax-treaty countries residing in China for less than 183 days shall pay individual income tax on income paid by their employers within China or on income not paid but incurred by foreign establishments located within China.
3.3 A non-resident taxpayer residing in China for more than 90 days (183 days for those from tax-treaty countries) but less than one year shall pay his individual income tax on all the income paid by his employers both inside and outside of China during his service in China.
3.4 Non-resident taxpayers working in China for less than 90 days or those from tax-treaty countries residing in China for less than 183 days shall pay individual income tax on income paid by their employers within China or on income not paid but incurred by foreign establishments located within China.
3.5 An individual without a permanent residence but having resided in China for a period ranging from one year to five years and with income from sources abroad may, upon approval by the tax authorities, pay individual income tax on the part paid by companies, enterprises and other economic institutions or individuals established in China; and in the case of having resided in China for more than five years, shall pay individual income tax on all of its income from overseas sources beginning from the sixth year.
4. Deduction of Personal Income Tax
At present, including but not limited to the following types of income by foreign individuals can be exempted from individual income tax:
4.1 Foreign individuals are exempted from individual income tax for their income from interest, dividends and bonuses from enterprises with foreign investments in China.
4.2 Foreign individual B or H shareholders are exempted from individual income tax on their dividends and bonuses from the share issuing enterprises in China.
4.3 Foreign individuals obtaining a housing allowance, meal allowance, relocation and laundry expenses in the form of non-cash or on an actual reimbursement basis.
4.4 Reasonable traveling allowance for business trips inside or outside of China.
4.5 The portions of home-leave expenses, language-training expenses, and education expenses for children that are approved by local tax authorities as reasonable.
4.6 Foreign staff in consulates and embassies can enjoy individual income tax exemption in accordance with the provisions of the related laws.
4.7 Experts who are sent to work in China under international exchange agreements
or by the United Nations.
5. Methods of Reporting and Paying Individual Income Tax for Foreign
Individuals
There are two methods of reporting and paying individual income tax for foreign individuals:
The paying enterprise or individual will act as the withholding agent and withhold the individual income tax upon payment of income. Taxpayers do not need to file a tax return
Taxpayers who derive wages and salaries without withholding agent, or from two or more locations, or from overseas should file the tax returns and pay the individual income tax to the tax authorities by themselves. Foreign individuals can appoint a tax agent to handle this matter.
Written by
Vincent Sun
Attorney at Law
Allen John Law Firm
Date: March 17, 2008
19 Comments on "Individual Income Tax for Foreign Individuals in China"
I am person going to work with Essar Construction india who will be posting me in China Harbin for 2years .
Essar will be paying me 6563$ Permonth
Can you tell me how much tax i have to pay
what is the cost of 1bedroom house at Harbin if i want to rent .please mail me in details
I am person going to work with Infosys tech. india who will be posting me in China Shanghai for 8 months.
Infosys will be paying me 3300 US Dollars.
Can you please tell me how much tax i have to pay.
what is the cost of 1bedroom house at Shanghai if i want on rent .please mail me in details.
what is an average expenditure per month including tax etc.
Mr Avinash Mattoo,
according to your discription, you should pay individual income tax, the specific amount is around 3150.
for a bedroom 3000RMB is ok.
I am a Malaysian working for a Hong Kong company drawing an annual salary of US$43,000. My monthly salary is deposited into my personal Hong Kong bank account. I am not resident in Hong Kong, but am based in Mainland China. However, due to a stipulated clause in my 2-year multiple entry visa, my maximum stay in mainland China each time is 30 days, and I have been diligently abiding by this clause. This Hong Kong company has only a representative office in mainland China where I am based. I would like to know that in this case, am I subjected to China individual income tax, Hong Kong individual income tax, or none at all.
Dear Vincent,
I have been transfered to China. I am under Z visa and am taking my work&residence permit.
I will be paid by my employer in India(paid from India to my USD a/c in China), and would be spending less than 183 days in China this year.
Am I requiered to pay tax?
Do reply.
We are setting up a registered office in China soon. In such a case does this change.
Thanks.
Sam
Hi Sam,
First of all, thanks for browsing our blog. well , if you stayed in China less than 183 days, you may not be taxed because your income paid from India and no your registed office in China assumed this part.
Second, when your company has registed a office in China, whether to pay individual income tax shall be in accordance with your office’s enterprise inocme tax.
1. if the office has its income and has paid enterprise income tax , ok, you may not pay your IIT.
2. if the office has no income or not pay EIT, your ITT usually was considered as assumed by your office in China, then you shall pay your ITT.
I hope you can understand what I mean, if any troubles please feel free to let me konw. well, if your company need register a office in shanghai we have some professions to help you.
Dear Vincent,
I will deputed at beijing China by next month. i would be paid some thing around 24000 RMB (including indian salary).
1. How much i should pay as tax?
2. Do i need to pay indian income tax also?
3. Living cost in Beijing?
Kindly reply
Regards
senthil.
Hi Senthil,
you should be taxed 3465 as your IIT. If the salary in India has been taxed , the amount may be dudected from 3465.
and I’m sorry i am not familiar about the living cost in Beijing.
Dear Vincent,
Sorry to trouble you again.
I need further clarification. Let me put it this way.
I am working for an Indian company which also has a registered office in China.
I have been transfered to China under a Z visa, and have my work and residence permit.
My salary would be paid by my Indian company from India and credited into my USD a/c in China. However the amount would not be debited to our office in China, but would be borne by headoffice in India.
This year I would be spending less than 183days in China.Do i need to pay tax. If not do I need to declare nill tax every month or at the begining of next year. And what papers do I need to keep for the same. In this case should I register with the local tax authorities.
Thanks a lot.
Do reply, as I need to decide. Rgds, Sam
Dear Vincent,
I haven’t received any advice from you yet regarding my inquiry dated 18 July 2008 above. I hope you can advise me soonest.
Thanks & regards,
CK
Dear Vincent,
your explanation is very clear,I have an extra detail to ask you.
A)In my condition I get a salary in Italy on Italian bank account from headquarters. 2800 Euro. It is not taxed in Italy because from April 2008 I am considered for the Italian tax bureau as a foreign employee.
B)I also get a salary in China since November 2006 since I am the GM of a Chinese Foreign Invested Company. 7500 RMB.I have a resident permit.
C)Plus I get reimbursed monthly home allowance,meal allowance,transportation allowance, … that varies every month. let’s say 10.000 to 15.000 RMB (can be reimbursed either in Italy or in China, I can decide).
What should I apply for taxation after April 2008 (i guess I have to consider the italian salary as individual income)? A + B + C (but C is variable everymonth), or A + B (since C shuold be deductable) or in which way?
thanks for explaining.
Marco
Dear Vincent,
If i earn USD7500/- AND USD500/-as house rent every month (i.e Total USD 8000/- per month ), at XIAMEN as representative of a german company, how much I/Tax I have to pay for the fin yr. 2008-09 to China government.
Pl let me know one bed room flat rent per month at XIAMEN.
Thanks,
Prasenjit
hi
w9ahjpy7nz0bynep
good luck
Hi Vincent,
glad to have u sharing your knowledge here.
I am a Malaysian working for a Singapore business process outsourcing company and I travel to China for more than 183 days a year to implement projects etc for my clients. I come for 1 wk and leave China and return 2 wks later.
How will I be taxed in this case?
Thanks.
Vincent,
I’m currently working in China as a foreigner. My payroll is local but I’m subject to filing tax worldwide. One question: about home trip, is the expense reimbursement by IID without any time constraint, such as a benefit but only subject to certain years of working in China but not more?
Thank you.
Karen
I am person going to work with MNC Company who will be posting me in China Qingdao for 1years .
MNC will be paying me 6000 RMB Permonth
Can you tell me how much tax i have to pay
please mail me in details’m currently working in China as a foreigner.
Thank you.
Ilyas
Hi,
I am deputed by my Indian company, in shanghai, for inspection/coordination of material bought from chinese supplier.
I was here for 90 days, and then i went back to India.
Now I am back after a month on a fresh Business visa.
I am paid salary in India, and I get only an allowance here.
I sit/work at my suppliers office in China.
Do I have to pay Income Tax ?
Kindly reply, ASAP.
It has been recommended to me that if I want to live in China for more then 183 days per year then an Representative Office (RO) would be the best option but, if I am not careful, I could potentially expose my worldwide income and gains to Chinese tax. However it also seems that one solution might be for me to form an RO and thereby obtain a resident visa which would enable me to reside in China for extended stays. Provided I was out of China for at least 91 days each tax year, I would seemingly not be considered either domiciled or resident for tax purposes and therefore would only be taxed on income derived within China, which could be quite low (despite other income earned outside China, which would not be taken into account or liable to Chinese tax)
1. Am I right in thinking that having a resident’s visa does not automatically class me as either domiciled or resident for tax purposes?
2. Am I right in thinking that if I am out of China for more than a cumulative total of 90 days in each tax year then I would be considered non-resident for tax purposes and therefore only taxed on my income derived actually within China and not on my worldwide income?
3. Does this 90 days need to be made up of trips exceeding 30 days each for those trips outside the country to qualify towards the 90 days cumulative total?
Foreigner’s personal income tax is a very complex problem and different provinces may have different local regulations in details. It is better to seek advice from local accounting firm. I hereby give you a general indea.
Generally speaking, if you are full-time position of the chief representative of the RO, you will be taxed full income no matter the income is paid by the RO in China or by the oversea investing company. If it is not a full-time job, you will be taxed according to the number of days stay in China. But the taxable income remain the same.