Foreigners Individual Income Tax in China

This is a FAQ, as you can see from the discussion under my entry: Personal in Tax in China. I am not a lawyer, and I don’t want to pretend to know everything, or the accurate information (even a lawyer cannot be hold responsible for tax issues you have). But to help my expats readers, I did have the opportunity to talk with a lawyer, so I can try to answer the question.

Foreigners Working for Chinese Entity Should Pay

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 need to pay tax to Chinese tax administration. In short, if the entity are you working for is registered in China, no matter what, you should pay the tax.

If you physically work in China, you should definitely pay your Income tax from day one you start to work.

Even if you do not physically work in China, you still need to pay income tax according to the money you get from this position. Of cause you don’t need to pay tax for your other income in your home country if you are not in China. Although it is a common practice that people make arrangement to pay by the offshore company, and only practically pay you 0 salary for the work you do in China, this practice is very dangerous.

Foreigners with China Residency Status Need to Pay Tax Based on Worldwide Tax

If you stay in China for more than 5 years, without leaving China for 30 consecutive days in one calendar year, or 90 days in total in a calendar year, you are regarded to have China Residency Status. In this case, you have to declare you worldwide income and pay the local tax authority based on that income. This includes but not limited to your property rental income in Mexico, your stock gain in NASDAQ, or your dividend in Europe. In short, you should pay tax for every penny.

Although the officials in the tax administration said they never heard of such a case, it is legally safe to stay out for 30 days every 5 year.

Expats or Visitors

If you stay in China for more than 183 days, you should pay tax for all the income from day one you enter China. This is often referred as the 183 day rule.

How Much Should Foreigners Pay

The tax rate is the same as local (not very sure about this, anyone wants to give any comment), which is listed in this entry. The only difference is, the first 4,000 RMB you earn is tax free.

YLF

30 thoughts on “Foreigners Individual Income Tax in China

  1. John

    If you are “non-Chinese” and work for the foreign embassy or consulate you are exempt from the China tax rules. This was announced a couple years ago from the FAO (Foreign Affairs Office of China).

  2. jojo

    Hi Wang,

    Accually, sth is wrong in your paper, feel free to talk with me,

    I am a tax consultant(especially in Expats) in PWC.

    What’s more, we have met each other in Shanghai 5G.

    Maybe if you have time, eat with me.

  3. Jet So

    It would be amusing to see how the central government would impose the deemed residency status on those foreigners that lived in China for over 5 years yet totally derive their funds from overseas.

  4. Jian Shuo Wang

    @jojo, would you please post a clarification or correction comments about the inaccurate information on this entry? I believe that helps a lot for foreigners in China.

  5. Johan

    Hi. What about if your a foreigner who is not formally working for a company inside China, but does freelance work for companies outside of China. Can companies transfer money to one’s Chinese bank account from abroad and how much tax does one need to pay?

    Who monitors this? If one is not formally working for a company inside China then how do the authorities/banks track or recognize this as a ‘business payment’?

  6. DB

    Re: Foreigners with China Residency Status Need to Pay Tax Based on Worldwide Tax

    I don’t fully understand this section. Does it mean, that “your property rental income in Mexico, your stock gain in NASDAQ, or your dividend in Europe” is treated as equivalent to income derived from employment in China? This would be somewhat flawed for at least two obvious reasons:

    1. In most other countires, tax rates applicable to dividends and capital gains differ from those applicable to income from employment.

    2. I don’t know about rental income in China, but to my knowledge, local Chinese do not (yet) pay any taxes on dividends and capital gains. Why should foreigners with China Residency Status pay taxes on theirs? This would be discrimination.

  7. TT

    Regarding the 5 year rule –

    You can avoid getting taxed by China by leaving 30 consecutive days once every year, or once every 5 years??

  8. Tony

    Two questions: I think the monthly allowance is up to 4800 RMB, no?

    And I understand rent is also tax-deductible for foreigners, is that true as well?

  9. JK

    For a foreigner working in China, how does she/he transfer her cash back to her home country? If she is traveling back for a holiday, what is the best way to take out more than RMB 20K?

  10. Amanda

    What is the salary range for a expatriate working as a Finance Manager in Shanghai?

  11. john Drayton

    I am due to go out to Shanghai in September for about 2 years. I am confused as to paying tax even after this informative entry. I am being told if I am paid in the UK I only pay tax on what money I take into China. How true is this. Any help would be great.

  12. Agnes

    If a person stay less than 5 years but he works in China for more than 183 days, I beileve he should regard as China Residential holder. So, he will be tax at resident rate, right? Does he has to declare his income outside China?

  13. steve

    i am thinking of working in china for one uk tax year – i will get an allowance for renting a flat and for food etc . can you tell me if that is taxable in china

  14. Ladislav

    Am I obligated to pay income tax in China, Shanghai for my USA retirement income? I am married and live in Shanghai for more than a year now. I intend to live here forever and planing to visit USA every two years, or so for period of 60 to 90 days.

    Thank you.

  15. Liam

    when a foreigner got a resident visa for 1 year,

    1. he/ she shall pay the income tax based on the earnings happened within China…

    2.in order to have a resident visa for 1 year, he/she needs to be officially employed by a proper Chinese company…when the company pays he/she each month in China, his/her income tax will be deducted first from the company…he/she doesn’t need to go to any tax bureaus…

    3. when he/she stays in China more than 5 years, he/she needs to pay the income tax based on the worldwide income….don’t know how they can track it down though…

    4. 5 years means during this time, he/she only had Temporary Trips outside China,which means no more than 30 days in a single trip and no more than 90 days total in 1 year…

    5. it is said that when one rents out a property, one needs to pay the rent tax…but who does?

    6. an individual can transfer, buy or sell foreign currencies 50k USD total each year in any banks in China…he/she needs to apply to the local SAFE if it is more than this figure…State Administration of Foreign Exchange…

  16. ange

    i hope this post is still active…

    i just came to shanghai for about a month or so from hong kong. my first ever salary here in china had about 9% deducted for tax, that’s a year’s worth of what i had to pay back in hong kong. times that by 12 months i’ll have to pay 12 times as much as i had to in hong kong. sounds quite insane for me.

    the company i work for in shanghai is locally owned. because i’m a hong kong resident, i can enter shanghai with what we call a “home return permit” (http://en.wikipedia.org/wiki/Home_Return_Permit). my company is currently applying a working visa for me. i have not officially signed my contract with them but details are under way and a draft of what the contract will be like has been shown to me already.

    now i’m really concerned about this much amount of tax that i’ll have to be paying. what is usually done or what can be done to avoid paying so much tax? i’m not trying to avoid tax entirely, but 12 times of what i had to pay in hong kong? that’s a bit tough. someone here mentioned the first 4800rmb can be freed for expats? is this for every paying month? what are the details? i would just like some suggestions and backup so i can speak with my directors easier.

    any help would be much appreciated! thank you so much!

  17. Dr. David

    Teachers in China who are US residents prior to entering China to work at an accredited institution are given tax exemption status under Article 19 of the US China Tax Convention Treaty in effect since 1987 and still valid today. However you must make sure you are given the proper tax registration forms (Non-resident’s claim for treatment under Double Taxation Agreement (DTA) (for record) and (for approval). These forms are in English and your employer in China should provide these upon request. Do not fill out and sign any tax registration forms in Chinese language only unless you know how to read the characters. Some schools, even those affiliated with American programs will tell you to sign a tax registration form all in Chinese. DO NOT DO THAT! All local tax bureaus in China are given notice from the Central Tax Bureau to follow all treaties in the collection of income taxes. However, this may not be followed locally, so one needs to be persistent in demanding that the directive be followed. There are no local exceptions to national treaties that apply to the mainland. There are probably thousands of teachers in China in the past and more in the future who have not or will not be informed properly about their tax exemption rights. So good luck to all of you US teachers in China and don’t be afraid to exercise your income tax exemption status for three years!

  18. Vijay Kumar Chowdhary

    Would like to know the following clarifications from your end before proceeding further in this matter :

    1) Our company is sending some technician to Chongqing for testing purpose. Will stay more then 183 days during the year. Their salary will be paid in India by the company and tax is going to deduct their in India , as per the local law.

    2) Indian company do not have any establishment and set up in China.

    3) Indian company will pay the daily and travelling allowance to them as per entitlement on per day basis to meet out their day to day expenses in Chongqing.

    4) Understand there is provision in law at China, as per notification released in July2004 that is a Senior person or technical person stay more than 183 days and less than 5 years in China then is exempted from local Income tax if salary is being paid abroad by non china base company. Will you ,please and confirm us where to apply and detail about the related applicable section.

    5) Otherwise also communicate the applicability of Income tax and

    kindly confirm on above lines please.

  19. Juno

    Quote,” . . . and I don’t want to pretend to know everything”—U r so funny guy. Let me ask u a question. what is the distinctive separation / difference between PRETENDING TO KNOW EVERYTHING and TRYING TO KNOW EVERYTHING??????

  20. Khaja

    I got Job in Shenyang as a yoga master. My salary is 12000 RMB. acomodation will be provide by company. So, How much i’ve to pay tax to Government?

  21. Sujit Kumar Ghosh

    I am expat and working in Indian Company whose representative office in Beijing. I am getting salary for which company is paying Income Tax. Now if I get Incentives then how to save the Tax payment?

  22. LChung

    Does foreign funded company who send their employee to China factories to performs as owner’s inspection work needs to pay China tax?

  23. Steve D

    I am leaving the UK, going to work in Chengdu China for 12 months. So I will be out of the country for 183 days.

    The salary is 4000 US Dollars per month, I need advice as to how to get the most out of this salary (freelance) as it will not cover my commitments in the Uk if I am taxed.

    Please advise as to the best way to get the maximum out of $4000.

    I am told that having an offshore account would be the best way to manage this income

  24. Ricky

    Hi,

    I live and work in Singapore but not a PR of Singapore and my company intends to move me to China to carry out inspections on quality in a shipyard for the next 2 years. My company does not have an office or any registered buisness in China at all. How does this have an impact on me paying tax.

    Your response will be appreciated.

    Regards,

    Ricky

  25. Julie

    My husband has gone to work in china for at least 12 months. He has proof of employment and residence over there. He is paid and pays tax in china. Where does he stand if he wants to send money back to the uk? Any advice would be very much appreciated.

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