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.