Foreigners Individual Income Tax in China
By Jian Shuo Wang on 2007-12-26 21:47 · Living in ShanghaiThis 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 Comments
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.
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'?
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.
You can avoid getting taxed by China by leaving 30 consecutive days once every year, or once every 5 years??
And I understand rent is also tax-deductible for foreigners, is that true as well?
Thank you.
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...
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!
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.
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
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