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Aug. 13 – Individuals sent to China on business for a cumulative period of time that exceeds 90 days may be liable for individual income tax in China, regardless of if they entered China on a business visa (F) or an employment visa (Z).
The SAT uses the so-called 90 or 183 day rule to determine whether a foreigner in China is required to pay IIT. For residents of countries that have signed a double tax treaty with China, an individual will be taxed if they spend more than 183 days in China in a calendar year. They will have to pay IIT in China based on the days they effectively spent in the country; if they spent 184 days within a calendar year, than they will have to pay taxes on all income sourced from China.
Residents of countries that do not have a double tax treaty with China will become liable for individual income tax after only 90 days in China.
Individual income tax in China is related to work performed in China, regardless of where the payment for that work is made. The tax administration has been known to request proof of salary payment from the foreign country such as W2 forms for U.S. nationals to determine IIT liability.
In September 2009, the State Administration of Taxation issued Circular 124 further regulating the tax administration for non-residents availing of the benefits provided by double tax treaty arrangements on their income in China. Foreign executives based in China for limited periods over a 12 month time frame currently may not have to declare taxable income in China if their stay is less than 183 (for residents of countries with a double tax treaty) or 90 days (for residents of countries without a double tax treaty).
For more information or advice on China’s tax regime, please contact Dezan Shira & Associates at tax@dezshira.com.
Related Reading
The China Tax Guide (Fourth Edition)
Contains a entire chapter on expatriate individual income tax in China
Meaning all American, Canadian, Australian and most EU nationals are able to enter China up to 183 days in any 365 day period without triggering Chinese income tax. We hope this article clarifies matters. – Chris
Chris,
Thanks for running this. It is very helpful. But I think it is a mistake for you to focus on just the tax aspects here because I thought that we are not allowed under China visa laws to stay more than 90 days if we work here. Please explain.
Thanks Robert. The visa laws are not the issue, its the fluctuation of the provision of the actual visa granted that varies from time to time and confuses the issue. Officially, China employs the “do as we are done by” position, meaning that it should charge the same and issue the same type of visa length to foreign nationals in the same manner as each specific foreign country treats Chinese nationals. However, in practice it doesn’t always work like that.
When there are matters of national security at stake – which existed for the Beijing Olympics, and is now in force during the Shanghai Expo, (which ends October 31st) – China has a habit of making visa issuance for visiting foreigners more difficult. For example, six and twelve month multi-entry visas are currently almost impossible to obtain for visiting businessmen, whereas previously they were relatively easy to get. Applications are usually restricted to double entries only at present for visiting foreign nationals. This doesn’t mean a succession of them cannot be applied for however, it just means having to make multiple procedures which is more awkward and expensive. I would however expect to see the current restrictions on business visas lifted early next year – China has finished with major events for awhile, and I think they’ll also feel it’s time to make visa applications easier for constantly visiting businessmen again. Visa issuance is a fluctuating operation in China, not everyone is treated equally, and some are more equal than others.
Concerning your observation “I thought that we are not allowed under China visa laws to stay more than 90 days if we work here”. This is incorrect. If you are physically working in China, you should have a work visa and permit. This is typically valid for twelve months, and allows multiple entries. If you are not in possession of a work visa and permit and are in fact physically working in China without one, you are breaking the law. You may want to take specific advice if this is the case. Thanks – Chris
Readers requiring further clarification over triggering their tax position in China and work visa regulations may wish to view these articles we posted on the subject earlier in the year:
Expatriate Income Tax Planning in China
Expatriates Going Offshore in China Contracts? Think Again
Our 2010 China Tax Guide may also be useful for more detailed corporate analysis. We regret we are unable to enter into specific cases online through a public forum; however specific income tax questions concerning employment in China may be, in full confidence, addressed to Dezan Shira & Associates’ national tax partner, Sabrina Zhang, at tax@dezshira.com.