China Expat Tax Filing and Declarations for 2011 Income

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Update: For information regarding expatriate income tax filing for the 2013 tax year, please click here.

Jan. 16 – Individuals residing in China are subject to individual income tax (IIT) and expatriates who are employed by a foreign-invested enterprise in China are liable for IIT from the first day they arrive in China.

IIT is normally withheld from wages or salaries by employers and paid to the tax authorities on a monthly basis (within 15 days of the end of each month). At the end of the year, an annual IIT declaration should be submitted to tax authorities within three months of the end of the previous calendar year (i.e., between January 1, 2012 and March 31, 2012 for the 2011 calendar year). Penalties for late filing can be up to five times the amount that was due.

Annual IIT declarations should be filed for taxpayers who are subject to IIT in China and meet at least one of the following five conditions:

  1. Have an annual income of more than RMB120,000
  2. Derive income from two or more places inside the People’s Republic of China
  3. Derive income from sources outside the People’s Republic of China
  4. Received taxable income for which there is no withholding agent
  5. Other conditions regulated by the State Council

What is considered annual income?

  • Wages and salaries
  • Income from individually-owned industrial and commercial households
  • Income from subcontracting or subleasing
  • Remuneration for labor services
  • Author’s remuneration
  • Incomes from royalties
  • Incomes from interests, stocks dividends and bonuses
  • Incomes from lease, transfer of property
  • Incidental incomes

How does IIT apply to expatriate income?
If an individual is paid by a China-based entity, any income derived from working in China will be taxable.

For non-China sourced income or income paid by overseas employers, tax liabilities for foreigners generally depend on the period of time an individual spends in China.

Individuals who spend less than 90 days (or 183 days for residents of countries that have signed a double taxation treaty with China) in one calendar year in China are exempt from IIT if the employment income is paid by an overseas entity.

Individuals who stay in China for more than 90 (183) days, but less than a year, are subject to personal income tax on their employment income derived from work performed in China – regardless of which entity is paying.

Residing in China for one calendar year means that, in a calendar year, temporary absences from China are less than 30 days continuously or 90 days altogether.

IIT applicability timeline
Individuals who reside in China for more than one year, but less than five years, are subject to personal income tax on both China-sourced and foreign-sourced income borne by a China-based entity. Foreign individuals who reside in China for more than five years are taxed on their worldwide income.

After an individual resides in China for five years, in the sixth year, if the individual resides in China for less than a year, the five year period is reset and the “90 (183) day rule” applies again.

Senior management
The 90 (183) day foreign employment exemption rule does not apply if the employee in question holds a senior management position in China.

These individuals are liable to individual income tax regardless of the number of days they reside in China during a calendar year.

In general, senior management positions include:

  • Director
  • Chief executive officer
  • General manager
  • Vice president
  • Chief representative
  • Individuals that hold positions in specific professional fields, such as chief engineer or chief financial officer
  • Certain individuals who do not hold a title such as manager but carry similar responsibilities or have a great influence on business operations or decisions

For people holding senior management positions, their director’s fee or salaries paid by domestic employers regardless of whether it is China or non-China sourced is subject to IIT in China.

Tax rates
Income from wages and salaries is taxed according to progressive rates, ranging from 3 percent to 45 percent of monthly taxable income.

Monthly taxable income is calculated after a standard monthly deduction of RMB3,500 for local employees. For foreign individuals working in China (including residents of Hong Kong, Taiwan and Macau), the standard monthly deduction is RMB4,800.

Money paid into Chinese social insurance can also be added to your pretax deduction.

  • Monthly Taxable Income = Monthly Income – RMB4,800
  • Tax Payable = Taxable Income x Applicable Tax Rate – Quick Calculation Deduction

IIT calculation for monthly salary
When calculating their IIT amount, foreign expatriates need to apportion their total taxable income based on the income source and time spent in and outside of China. The specific formulae are listed in the accompanying table.

Employment benefits
For IIT purposes, “taxable income” refers to “wages, salaries, bonuses, year-end bonus, profit shares, allowances or subsidies or other income related to job or employment.”

Certain employment benefits for foreign individuals could be specifically treated as not being taxable under the IIT law if certain criteria can be met. These include (with supporting invoices where applicable):

  • Employee housing costs
  • Reasonable home leave fares of two trips per year for the employee
  • Reasonable employee relocation and moving costs
  • Reasonable reimbursement of certain meals, laundry, language training costs and children’s education expenses in China
  • Any cash allowance paid to cover expected work-related expenditures (such as an entertaining or travel allowance) will be fully taxable to an employee

IIT may be reduced by reimbursing specific work-related expenses incurred by an employee (which may include entertainment, health or social club fees, local travel, newspapers and journals, telephone costs, etc.) instead of paying an allowance.

Non-employment income
Non-employment income is taxed at rates generally ranging from 5 percent to 35 percent, depending on the income source.

Proprietors; contracting and leasing
Operating profit of individual industrialists and merchants’ production and business operations or from the contracting or leasing of operations of enterprises and institutions is subject to tax at progressive rates ranging from 5 percent to 35 percent. The 35 percent marginal rate applies to annual taxable income (gross revenue less allowable costs, expenses and losses) over RMB100,000.

Income of authors
Flat rate of 20 percent, applied to 70 percent of gross.

Compensation for personal services
Taxable at 20 percent if the taxable income (after allowable deductions) from a single payment does not exceed RMB20,000; 30 percent for the portion over RMB20,000 but not exceeding RMB50,000; and 40 percent for the portion exceeding RMB50,000.

Royalties, interest, dividends, leases on or assignment of property, other income
Flat rate of 20 percent.

Deductions
No deduction is allowed against income from interest, dividends, bonuses or other income. Deductions are allowed from other sources of income, including:

Contracting and leasing of operations of enterprises and institutions
Necessary expenses are deductible.

Compensation for personal services, royalties, or leases on property
A deduction of RMB800 is allowed if the income received in a single payment is less than RMB4,000. If the income received in a single payment is more than RMB4,000, a 20 percent deduction is allowed.

Property transfers
Original cost plus reasonable expenses are deductible.

Content for this article was taken from the January/February issue of China Briefing Magazine, titled “Annual Compliance for FIEs.” Prior to distributing and repatriating profits, foreign-invested enterprises must complete annual compliance, involving an audit, tax filing and inspection. These procedures are not only required by law (and completing them improperly could lead to fines), but are a good opportunity to conduct an internal financial health check. We discuss all of this, in addition to clarifying expatriate IIT procedures, in the new issue of China Briefing Magazine which is immediately available as a complimentary PDF download on the Asia Briefing Bookstore.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China, Hong Kong, India, Singapore and Vietnam. For further information on individual tax rates or filings in China, please email china@dezshira.com.

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73 Responses

  • KweeLin Yang says:

    Do US expats have to furnish their overseas returns to IRS?
    Can the IRS ask for income tax returns filed by US persons living and paying taxes in China?

  • Anon says:

    If I’m living in China on an allowance given to me by a relative (under 10,000RMB per month) and the company who I obtain my work permit with don’t pay me (as a journalist), how will tax work for me?

  • Bill says:

    Would the Chief Representative of a China corporation, who does not meet the residency requirements ( out of China for more then 30 continuous days or 90 days commutative ) and has no income paid by a China corporation, be required to file the Annual Self Declaration?

    Would the Chief Representative who does not meet the residency requirements be liable for China IIT on their Non-China sourced income?

    Thank you, your articles and publications a very helpful and a great resource.

  • Chris Devonshire-Ellis says:

    @KweeLin – yes as a US national you must still declare your earnt income to the IRS. However Double Tax Agreements between US & China mean you won’t have to pay full tax in both, but the IRS will assist you with that. Let me know at chris@dezshira.com if you need a US Tax person in China to talk too.
    @Anon – you must be paid by your company if you have a work permit, that’s the law. Again, I think you better email us about your situation.
    @Bill – normally as you have a position in China but are non-resident, you pay income tax based on the actual number of days you are in the country. This should ideally be done each month. Again, please email me with specifics and we’ll sort this out for you.

  • Justina says:

    I’ve been approached to do some ad hoc work for a company with no legal presence in China. They will pay me in Hong Kong but require me to provide a China Tax ID in order to be able to work with them. Do you know how I would go about getting an ID if I have no employer in China and am here under a spouse Visa? Thank you in advance!

  • Des Gedow says:

    I am an Australian resident and have been invited to work in China as a subcontractor for a period of 2 years.

    I have found your web page very informative but I am having difficulty in answering a key question that will determine whether or not I will accept the contract.

    I operate a limited liability company in Australia. It is this company that will enter into agreement for me to provide services. On the Australia side, I pay myself a monthly salary(80000rmb), I draw 20000 salary and voluntarily contribute 60000 to my superannuation fund at 15% tax rate. The remainder is soaked up with other deductions such as operating costs on the company invoiceable amount (100000 rmb per month)
    However as I will work for one Client only for the whole tax year, the Australian tax authorities consider me a sole trader and all income (100000) after deductions is considered my and my wife’s income as shareholders. Of course taxes can be reduced through various mechanisms with the additional benefit of being able to deduct voluntary superannuation payments up to $50000 per year.
    The benefits of the limited liability company structure are liability is limited and insurances are easier to obtain, and whatever net company amount remains is paid to myself and my wife as shareholders.
    However I will work in China more than 183 days per year so I will be taxed on my income there.
    My question is will I be taxed in China on the 20000 (salary),80000 (salary plus super contribution)or the 100000?
    FYI I intend to leave China over that time at least 30 consecutive days or 90 cumulative days so as not to be captured by the 5 year rule. I also will retain my Australian residency status despite living outside the country more than 183 days
    Thank you in anticipation for your response

  • Jay Jay says:

    I arrived in China in Feb 8, 2008. When does the five year calculate from…..Feb 8, 2008 or Jan 1, 2008? When do I have to complete my 30 day day exit…before Feb 8, 2013 or before Dec 31, 2012?

  • Saran says:

    I am a salaried person in China. For tax deduction, Housing rent fapios can be shown monthly for tax exemption.
    But wanted to know if the housing loan interest amount that was paid by me in other country, for which, the wages that I get here in China had been used to pay the interest.
    Can I consider the housing loan interest paid for tax exemption or deduction?

  • Snyder Rivera says:

    I am a seff-employed consultant providing auditing and consulting servces to Chinese and foreign manufacturing companies in various industries. I live in china, but my time in China varies because of my frequent travel to USA for work. Do I pay taxes in China or USA? Regardless of time spent in China is less than 90 days per year, can I choose to pay taxes in China instead of USA? If so, how do I go about doing that? I get paid in either RMB or USD. When paid in RMB, it is direct deposited to my account in China. USD goes to my USA account.

  • CJ Rock says:

    Regarding “Breaking Tax Residency”

    In the first article published on this topic titled: 2010 China Expat Income Tax Planning. A question was raised about breaking tax residency if a person exceeds the 5-year mark. The answer given was that in order to avoid world-wide tax rule one could travel outside of China each subsequent year for >30 days (i.e. 6th year and beyond) OR to break residency and reset the clock one must reside in China for < 90 days consecutively in a calendar year.

    In this year's article the section called: "IIT applicability timeline" a statement is made which seems that the law may have changed… suggesting that the residency can be broken if: " After an individual resides in China for five years, in the sixth year, if the individual resides in China for less than a year, the five year period is reset and the “90 (183) day rule” applies again."

    Can you clarify how to avoid paying taxes on world-wide income if once exceeds the 5-year mark.

    Regards,
    CJ

  • adam says:

    If one leaves the country for 30 days, does one need to cancel their work contract and once they return, sign a new one, or just spending 30 days outside of the country (for any work or leisure purpose) is fine whilst still being employed?

    Does one need to tell someone before/after the 30 day trip?

    Thanks
    Adam

  • Agnes says:

    Thank you for the useful information!

    In regards to the “Certain employment benefits for foreign individuals could be specifically treated as not being taxable”, what’s the general rule on the percentage of this to the monthly salary? For example if I earn RMB100,000, can I claim 40% of these expenses with fapiao provided?

  • Agnes says:

    Sorry, would like to modify my question a bit.

    In regards to the “Certain employment benefits for foreign individuals could be specifically treated as not being taxable”, what’s the general rule on the percentage or the ‘reasonable reimbursement amount’ of this to the monthly salary? For example if I earn RMB100,000 per month, can I claim 40% of my monthly salary as these expenses with fapiao provided?

  • Snyder Rivera says:

    In reading your article on IIT for expats, I believe I meet the criteria regarding the 90 day / 183 rule and earnt income.

    I am self-employed and China is now my permanent residence and is where I plan to retire. I travel back and forth between China and USA as a consultant. I stay on average 6 – 8 weeks, sometimes 12 weeks working in USA and traveling to different customers thoughout the USA. When home in China I stay 4 – 6 weeks, sometimes 8 weeks before I fly back to USA to work. I also do some work in China, Philippines, Australia, Tiawan and UK, though each location is visited one time each year from 2 – 5 days at each location, with the exception in China. When contracted for consulting services in China, average working days in one year 40 – 60 days spread out over the entire year.

    How do I go about starting to pay taxes in China? I do not have an employer because I work for myself. I do have a bank account in China for direct deposit of any income earned for my services directly in China by a Chinese and/or Foreign Enterprise.

    I want to avoid double-taxation and I think I qualify to pay IIt in China.

    Please let me know what to do.

  • Flo says:

    Are the 5 years counted from arrival chop or somehow related to Visa status? I was in China on F-Visa initially before the company changed to a Z-Visa. So I guess my question is whether the worldwide income declaration is somehow related to 5 years of continuous Z-Visa. Appreciate your clarification on this question. Flo

  • Rasmus says:

    How is the 183 days calculated? Is it a “rolling” year, meaning the I always have to look back 1 year and then sum up the number of days I have stayed in China for that year? Then I would be allowed to stay for 183 days back to back and then leave for the remaining 182 days (365-183=182)? Or do they calculate a monthy average (183/12 = 15.25), and then say I can only stay in China for 15.25 days a month?

    /Rasmus

  • @Justina: You can pay tax in China on an adhoc basis. The tax bureau in China do provide a receipt. Email us at tax@dezshira.com if you need assistance with this, payment can be done remotely without you having to do it personally.
    @Des: Please contact our Australian tax director, Richard Cant. Email: richard.cant@dezshira.com
    @Jay Jay – from the date in your passport being 8th February.
    @Saran – There is no deduction for overseas housing loan allowance from your China salary. You need to apply for relief in your home country.
    @Snyder – You can pay pro-rata in China. Bear in mind you’re probably breaking your visa regulations by being paid in RMB for services in China unless you have a work permit. If so, you won’t be able to transfer that RMB out of your China account.
    @CJ Rock: Don’t go over the 5 year rule. Break it up by having a month off before the due date, its relatively simple;
    @Adam: Work permits are annual. Theoretically you’re supposed to hand them back every time you leave China but I’ve never heard of immigration asking for these documents.
    @Agnes: I’ll refer you to my colleague Sabrina Zhang at sabrina@dezshira.com;
    @Synder: It sounds like you need to get legal and get permits. I’ll refer you to Sabrina (see above)
    @Flo: From the date of your Z visa;
    Hope that helps!
    Best regards;
    Chris

  • @Rasmus

    With regards to the 183 Days Rule:

    The 183 days rule is calculated based on the calendar year and means accumulated 183 days in one calendar year. I think the first assumption in your question is correct, but you must note that in the 183 days calculation, the day you arrived in China is calculated as 1 day and the day you leave China is also calculated as 1 day, if you arrived and left China in the same day, that is calculated as 1 day.

    For further questions on this, please email tax@dezshira.com

  • chai says:

    Hi Chris, thank you for the article. It was really helpful.

    I am a Singaporean, moving to Beijing. Can i kindly ask if i would be entitled to tax reimbursable deductions on housing even though it is not an allowance that has been provided by my employer? Similarly, would i be entitled to other reimbursements such as home leave allowance, relocation expenses.

    Lastly, is there a cap on these tax exempt deductibles?

    Thank you so much!

  • @Chai: Thanks for the note – please take that up with my colleague Sabrina Zhang, in our Beijing office: sabrina@dezshira.com
    And drop me a line when you arrive in Beijing!
    Best wishes
    Chris

  • Z says:

    Hi there,

    I am a Singaporean working in Shanghai.

    It is mentioned that “Certain employment benefits for foreign individuals could be specifically treated as not being taxable under the IIT law if certain criteria can be met.”

    I’d like to know how I can fully maximize any benefits. Where can I find out the full list of these benefits that could be used to reduce my taxable income?

    If I had bought a house in China, can I use the mortgage payment to reduce my taxable income (i.e. treat that as an expense)?

    If I am now paying for an overseas education (e.g. an executive degree program outside of China), can that cost be used as an expense to lower my taxable income?

    Thank you

  • @Z – for these specific questions, please email our Shanghai office directly and they’ll look after you. Some of the expenses are a bit of a moving target. Contact: shanghai@dezshira.com and label your email query “IIT Shanghai”. Good luck with getting some reductions! – Chris

  • Tennyson Ko says:

    Hi,

    I’m a Hongkong Chinese, am working with a chinese own enterprises at Hangzhou China. At year 2011 due to the re-location by the company I need to work at Canada, and most of the time working at Canada, I counted only 30 days spent inside China. The company tells me, according to the 2011 new taxation law of China, they just deduct the RMB4,800 and the rest amount of my income are being taxed (without any deduction, such as rent; meal; travel…etc.), is it correct or not?

    Thank you very much,
    Tennyson

  • Dear Tennyson, yes it seems something may not be right there. We’d need to discuss this as there may be more information that we need to know. Please contact my colleague Richard Cant at richard.cant@dezshira.com. We have an office in Hangzhou.
    Best regards;
    Chris

  • Achille Ubalijoro says:

    I have a limited liability company in Canada, for which I am sole owner. I am in discussions with a french company that has offices in Asia and therefore legal entities in Asia (China, South Korea, India, Japan). If hired, I would be hired to work for them China, and paid by the Japanese entity via my consulting company in Canada. Intent is to sign for no less than a one year contract. I give myself an $80K CAD salary in Canada and $40K dividends, I would need to know what would be my tax exposure in China and what would be the best tax schema? Employment would be most likely in Shanghai. Should I also look at setting-up a company in Asia (e.g. Hong Kong).

  • @Achille – You will have a China tax liability under the circumstances outlined. The good news is China has a DTA with Canada so you shouldn’t get taxed twice. It’ll need working through though, and you’ll need to register in China. I suggest you contact Richard Cant at our Shanghai office – email shanghai@dezshira.com
    Thanks – Chris

  • Bob says:

    Dear Sir,

    thanks for this important information, first I read the article starting from “”2010 China Expat Income Tax Planning” followed by this tread. But now I’m confused:

    In a earlier response :

    Editor says:
    October 13, 2010 at 4:02 pm
    If your 5 year period ends on 30 June 2010, from my understanding, you arrived in China on July 1 2005. Calendar year 2005 is not your first year in China, because:

    1. You were absent from China for more than 30 days continuously in calendar year 2006, for example: January 2005
    2. You were absent from China for more than 90 days cumulatively in calendar year 2005, for example: the days cumulative before July 1 2005

    In your case:

    0 year: 2005
    1st year: 2006
    2rd year: 2007
    3rd year: 2008
    4th year: 2009
    5th year: 2010

    Therefore, if you do not want to become a resident taxpayer in China, it is suggested you travel outside China for more than 30 days continuously in your 5th year 2010, before December 31 2010.

    Now this is clear to me, arrives in October 2007, means I have to leave China for 30 days before December 31, 2012

    But this confuses me:

    Jay Jay says:
    February 27, 2012 at 4:14 pm
    I arrived in China in Feb 8, 2008. When does the five year calculate from…..Feb 8, 2008 or Jan 1, 2008? When do I have to complete my 30 day day exit…before Feb 8, 2013 or before Dec 31, 2012?

    Chris Devonshire-Ellis says:
    May 28, 2012 at 6:42 pm
    @Jay Jay – from the date in your passport being 8th February.

    It’s quiet differChris Devonshire-Ellis says:
    May 28, 2012 at 6:42 pm
    @Justina: You can pay tax in China on an adhoc basis. The tax bureau in China do provide a receipt. Email us at tax@dezshira.com if you need assistance with this, payment can be done remotely without you having to do it personally.
    @Des: Please contact our Australian tax director, Richard Cant. Email: richard.cant@dezshira.com
    @Jay Jay – from the date in your passport being 8th February.

    Now this is quiet different then the first response, meaning I have to leave China for 30 days before September 30,2012

    Please clarify, much appreciate your work here.

    Brgds Bob

  • Bob says:

    Need to leave China for at least 30 days, should I cancel my work permit and residence visa or is this not necessary?

    If anybody else then the webmaster can help me, please sent a email to bob.heynderickx@gmail.com

    thanks a lot

  • Bob I’ve dropped you an email. If anyone else has questions please feel free to ask. – Chris

  • Sam says:

    If an employee has to pay tax on UK income over to the tax bureau in China. Can the UK company pay this directly to the tax bureau, or does it have to be submitted via the foreign investment enterprise the employee is working for?

  • Oo says:

    Dear Sirs,
    This post and the comments have been extremely informative.

    But one thing I haven’t fully understood yet regarding the “5years/30 day” law:
    I came to China on a F-Visa at the end of 2007 and haven’t been outside of China for 30 consecutive days since.

    So this year is my 5th full year in China (2008, 2009, 2010, 2011, 2012), yet I am not sure if 2008 should count as part of that equation: I was here the full year without being abroad for more than 30 days,
    BUT I didn’t have a work visa and residence permit for the first half of the year ( was here on F-Visa in the beginning of the year.)

    Would appreciate any advise. thanks a lot.

  • Matt says:

    If I were to complete work in China for a UK company and were paid in the UK, would I a) be liable for Chinese IIT and b) could I complete this work as a dependent on my partner’s working permit?

  • @Oo – You’ve triggered the fivevyear rule it’s based on time in China not on your visa type. The good news is I don’t think the Chinese Tax Bureau have ever collected any world wide income – but they do have the right should they decide to enforce it.
    @Matt – it’s individual income tax, not dependents income tax, so you are personally liable. And if you work in China you are liable to pay tax, even if you are paid in the UK.
    CDE

  • Cobol says:

    Hi

    I have been offered a contract to work in China and paid by a Chinese based company.

    I have been staying in china on an “L” visa and not working in the country.

    My time in China has been since MAY 2010, on my present passport.

    I do not receive any income from abroad, just living on savings.

    Will I only pay tax from the day I get my Chinese work permit.

    Also I am over retirement age, is there any difference on the tax I will be charged

    Cheers

  • @Cobol; There will be no difference in your tax status in Chin; as a foreign national your retirement age does not affect your income here. However, there are restrictions on the age of foreign employees in China and you must insist your Chinese employer does in fact give you a work permit. – Chris

  • Veronique says:

    Hi,

    I am French and came to China on Dec. 1st, 2007 and I understand that this is my 5th full year.

    – Will my 6th year start on Dec. 2nd 2012 or Jan. 1st 2013?
    – I called the French Consulate and they told me that it is necessary to get out of China for a consecutive 30 days within 1 calendar year OR 90 cumulative days within 5 calendar years. Could you confirm?

    Thanks for the info!

    Veronique.

  • Veronique says:

    Sorry would like to add another question:

    – What is specifically considered and ‘taxable’ as worldwide income? For instance, I have an apartment back in France which my brother, my parents are sharing (meaning I am partial owner of the property). If i dont do the tax break, does it mean the Chinese Tax Government can tax this property?

    Thanks again for your precious information!

    Veroniaue.

  • @Veronique – the information provided to you is correct. Concerning your property income issue, yes, theoretically the Chinese would have the right to tax you on that. However, meeting with the SAT recently I asked if they had ever collected worldwide income tax from any foreigners, and the answer was “No”. But they could, and if they start to enforce that there will be issues. At some point it’ll happen – so it makes sense to break up that five years, just in case. – Chris

  • Mike says:

    I am a Managing Director of our business in North Asia (China, Korea, HK, Japan). I obtained my work permit in July and “commuted” before then. I now live in China and have a residency Visa through July 2013. I will have less than 183 days in China for 2012. My pay comes from our corporate office in the US. Will I be subject to Chinese taxes in 2012? Also, If I don’t renew my residency permit and simply commute the second half of 2013, would I be subject to Chinese Taxes if I spend less than 183 days? How do they determine income earned from “China” in a role like mine that has multiple countries?

  • Mike you are subject to income tax in China as your residency is confirmed here. Your situation is somewhat complex as you are paid in the US (you should be paid in China) and you travel. Unless this is properly organised, you could end up being taxed in more than one country – which is why the US and China have a “double-tax treaty”. This needs to be invoked properly, and the issues you are facing are solvable.

    It needs specific discussion, please email us directly at tax@dezshira.com to arrange to talk directly with one of our tax experts.
    Best wishes
    Chris

  • Martin says:

    I am considering to move to Shenzhen, in order to be able to live together with mainland Chinese wife and her parents. However I am a permanent Hong Kong and work in Hong Kong, and would travel every weekday to work in Hong Kong (from Shenzhen to Hong Kong in the morning, and back in the evening). This would mean I would stay in Shenzhen for more than 183 days, but I would also stay in Hong Kong for more than 183 days? The question is, where would I have to pay income tax? None of the income is derived from Shenzhen/China, the work is all done in Hong Kong, the employer is a Hong Kong company etc… but do I understand it right that the 183 day rule would force me to pay tax in China anyway, for income earned in Hong Kong? many thanks for any comments, perhaps there are others with the same ‘problem’ living just across the Shenzhen border and travelling daily to Hong Kong to work??

  • Hi Martin, yes, there are issues here although Hong Kong does have arrangements with China over these issues. Dealing with them is case specific. We have offices in both Hong Kong and Shenzhen, email to Shenzhen@dezshira.com for advice, asking for Alberto Vettoretti.
    Thanks
    Chris

  • James says:

    I am an American citizen, I maintain a residence in the US for mail and whatever. I have retired to China. My only income will be Social Security, IRA distributions and savings. I will be in China more than 183 days per year but I will leave China over 30 consecutive days every 5 years. Must I pay any tax to China ?
    Thankyou – James

  • Hi James; China does have specific tax rules and visa documentation in place for retirees. You must have gone through these formalities before being able to claim tax exemptions. If you
    have not, you will be taxable on your pensionable income. If you require assistance with sorting this out please contact us at china@dezshira.com
    Best wishes
    Chris

  • Vijay says:

    Dear sir/madam,
    I am looking for some help related to worldwide income tax.
    1. I came to China effective Oct 1st, 2002
    2. Work permit was applied and received wef Nov 1st, 2002 through HK, as during those time we had to apply in HK.
    3. In calender year 2005, I was out of China for 30 day consecutive and also 90 days in total
    4. Then, in calender year 2007, I was out of China for 30 day consecutive and also 90 days in total
    5. Questions-

    Q1> In my case 5 year time period starts from a) Oct 1st 2002 …I am assuming YES
    Q2> In my case since it starts Oct 1st 2002, and I was away in 2005…..Can I say I am safe for the period Jan 1, 2002 to Dec 31st, 2006……total of 5 Calender Years slab.
    Q3> Can I also say, I am fine for the 5 years 2007 (Jan 1st) to Dec 31st, 2012….because in 2007 I was out of China for 30 consecutive days and also 90 cummulative day (calender year 2007).
    Q4> Does China imposes worldwide income rules on an Indian, considering India-China do not have a treaty on Individual income?

    I really appreciate your answers.

    With best regards
    Vijay

  • Vijay says:

    In addition to my previous question…..30 days consecutive and 90 days total…..what exactly is this rule? Is it 30 days consecutive in ONE CALENDER YEAR or FROM DATE OF FIRST LANDING if you are working in China. Similarly is 90 days total out of China during a CALENDER YEAR or TOTAL OF 5 CALENDER YEAR from DATE OF FIRST LANDING and slabs of 5 Year. Thank you

  • Cory Lam says:

    Hi Vijay

    I’ve sent you an email relating in response to your questions above. If there are any specific queries, please feel free to email me at cory.lam@dezshira.com.

    Thanks
    Cory

  • Just to clarify for other readers, it’s 30 days from date of entry. All 30, 90 and 5 year rules relate to your date of entry not to calender year.
    Chris

  • satsy says:

    Hi,
    the question is more or less same as @Saran. But one clarification – if the person gets the salary only from china and pays housing loan interest in the home country, the loan interest should be allowed for deduction in china salary. Because, there will not be any tax for that year in the home country and even though the person can apply for relief, it is of no use.
    Please suggest or clarify.
    Will this overseas housing loan interest can be deducted for tax in the china salary? if no, Is this possible to add this deduction into 2013 tax rule?

  • @Saran – I don’t think that you’ll have much success in getting the Chinese tax bureau to permit you to deduct loans against your China salary for a mortgage provided by a foreign bank against assets you and the same bank hold overseas. – CDE

  • Jason says:

    I have a job with a UK company, I am paid in UK Pounds and live in the UK. However my job entails long stays in China as my company has a China based supplier, and my job may require me to spend several months at a time working at my company’s supplier. If my total stay in China for a given year is over the permitted 183 days, would I be required to pay Chinese IIT, even though I am paid in UK pounds by a UK based company (and paying the UK income tax on my whole salary)?

    If I am liable for Chinese IIT, then how would I be able to calculate how much I pay? My stays in China are not pre-determined, as I stay until the job is done, so it could be several weeks or several months.

    Any assistance will be greatly appreciated.

    Thanks
    Jason

  • Jason says:

    One more comment…I do not have a work permit, I come to China using a multi-entry Business Visa (allowing a max of 30 days per visit). As the China based supplier is in Shenzhen, if my stay requires longer thean 30 days, I simply spend a weekend in Hong Kong.

    Thanks
    Jason

  • @ Jason – it appears you will be liable for IIT in China. Due to the uncertaincy surrounding your movements between the UK and China, it is probably wise to arrange to pay tax on a monthly pro rata basis at the end of each month in China. You can arrange to do this either yourself, or maybe your supplier will assist, or if you wish we have a Shenzhen office who can do this for you – you can contact them at: shenzhen@dezshira.com

    You would be given a tax paid receipt and you will need to present this to the Inland Revenue in the UK to get a rebate. Your UK accountant or accounting department where you work should be able to arrannge this for you.

    The risk is, if you don’t file for tax and are found out, you can be deported and fined (up to seven times the IIT due) and may be barred from entering China in the future. It’s not really worth it.

    Just as an aside, the next issue of China Briefing magazine is out on 1st January and contains a full description of paying IIT and how to do it. It’s downloadable free and we’ll send it to you if you subscribe (also free) on the button on the top of the page. – Chris

  • Bob J says:

    Hello,

    I am an ex-pat who is employed by a Chinese university in beijing, and they are not really set up for foreigners, since there are very few of us. I have a question about allowable non-taxable expenses. I get a modest housing allowance (it doesn’t cover the full rent) which is currently taxed, and I pay for my child’s education from post-tax income, as well as flights home for my family etc.

    Is there any way to legitimately reduce my tax liability? Does the employer have a legal requirement to comply, or is it up to the employer whether it wants to or not? My ex-pat friends seem to reduce their tax liability significantly by claiming their rent/school fees etc against their taxable income, regardless of whether it is an ‘employee benefit’, but I want to things above board. Unfortunately, not had a great deal of luck talking to my employer about this, partly due to communication issues.

    thanks,

    B.

  • MG says:

    Hi Chris,

    Firstly thanks for the great information and your efforts answering follow-up questions.

    I am confused about how the 5 year rule is applied. In response to Flo’s question:
    Flo says:

    “May 26, 2012 at 8:10 pm

    Are the 5 years counted from arrival chop or somehow related to Visa status? I was in China on F-Visa initially before the company changed to a Z-Visa. So I guess my question is whether the worldwide income declaration is somehow related to 5 years of continuous Z-Visa. Appreciate your clarification on this question. Flo”

    You said “@Flo: From the date of your Z visa;”

    However in reply to Oo’s question you said “@Oo – You’ve triggered the fivevyear rule it’s based on time in China not on your visa type.”

    Could you please clarify which it is?

    Thanks.

  • @MG – it’s based upon the date you arrived in China, not on your visa status or issuance.
    Best regards;
    Chris

  • Tiger says:

    I am Italian and I have married a Chinese lady and we both plan to move from UK to Shanghai and register in her local family office, in order to get long-term Visa.

    Would local family registration affect my tax status in China e.g. liabilility for local derived income only ?

    Thanks

  • @Tiger – First: Congratulations!
    Second: No, your marital status does not affect your tax position in China. There are no tax incentives or breaks for you when marrying a Chinese national. – Chris

  • Bob J says:

    Any chance of a comment on my situation? Would be much appreciated.

    B.

  • @Bob – it’s difficult to comment on the details provided. However please email Sabrina Zhang at beijing@dezshira.com and she’ll have someone get back to you. – Chris

  • Moo says:

    Does anyone know people in Shanghai that can help handle my personal taxes?

  • Hi Moo; Please contact Julia Zhu at our Shanghai office at shanghai@dezshira.com
    Best regards;
    Chris

  • Adhikari says:

    hi, I have two question about the relocation and yearly bonus tax. What is the tax rate for relocation cost if it paid together with monthly salary. for example my monthly salary is 15000 RMB and I got 15000 rmb for relocation. now total 30000 rmb. I have to pay tax based on 30000 RMB or we can seperate the amount relocation and monthly salary? and recolation cost can be deducted before paying the tax or not?
    Similarly, bonus also combined with salary or it can be paid seperately? please suggest.

  • @Adhikari – the issue concerning the reimbursement of relocation expenses needs careful handling so as not to have the authorities regard this as salaried income. Concerning your bonus, this is also taxable however attention needs to be taken to ensure that this does not impact upon the tax rate and band you are currently under in China. If may for example be better to arrange to pay your bonus in installments rather than one monthly lump sum.

    You need professional advice on this issue and I suggest you email us, with details of your location in China at tax@dezshira.com and we’ll have our nearest office to you get in touch to discuss these matters. Best regards – Chris

  • JZPRC says:

    Hi Chris,

    I am seeking your advice on a potential issue re 5 year ITT rule. I have been living and working in China in various capacities for coming up to 10 years.(May 2013)

    After reading on-line on the 5 Year IIT requirements ,I understand that a 30 day trip out of country resets the Tax clock.
    In my 1st 5 years I was out of country for over 30 Consecutive days.
    However as I am coming up to my 10th year in China .
    I want to know if the same requirement applies ?

    Is the Global Individual Income Tax worked out on 5 year increments ?
    Or just the 1st the first 5 years ?

    I am a British Citizen and am a property owner in the UK with rental incomes which covers my mortgage.

    Would greatly appreciate your advice on this issue as May is my 10 year anniversary in China.

    Cheers

  • @JZPRC – I think you’d better have a chat with us about the specifics. We’ll need more details than provuded here. Drop us a line at tax@dezshira.com and someone will get back to you and advice. – Chris

  • Aaron says:

    Individuals who stay in China for more than 90 (183) days, but less than a year, are subject to personal income tax on their employment income derived from work performed in China – regardless of which entity is paying.

    What do you mean “work performed in China”? On one hand, you mentioned that being a resident for over 5 years entails a tax on worldwide income. What if I perform online freelancing work “performed in China”, but I am a resident of China for less than 5 years? Is this taxed or is this not considered “performed in China”.

  • @Aaron – the key issues here are two fold: working in China, and time. If you spend more than 183 days in China in any 365 day period this changes your tax “residency” and you must declare any income earned, anywhere, to the Chinese authorities first. In your circumstances it seems you should be taxable in China. Your physical presence in China is what triggers it, not ‘working online’. – Chris

  • Vincent says:

    Hi Chris,
    I will switch to a local contract soon in Foshan/Guangzhou and would like to know the process to be able to reduce IIT monthly based on Fapiaos for foreigners.
    My HR is not aware of the process and I would need something to get them up and running there.

    Thanks,
    Vincent

  • @ Vincent – Someone from our Guangzhou office will be contacting you directy about this. Thanks – Chris

  • Sin says:

    Hi, I was sent by my employer in HKG to provide consulting service to a company in China, staying over 183 days in China. The company in China paid consulting fee to my employer in HKG. My employer paid me the monthly salary in HKG. As I need to pay tax China, I observe in chinatax.gov.cn that I have to fill in the “employer’s tax code” in the IIT form. There is no such code for my employer. Do I fill in the one for the company in China? But they are not my employer and they don’t know my monthly pay.

    Thanks

  • @Sin – Your HK employer won’t have a mainland China tax code. Are you still working in China? If so, you do need to get this sorted and I suggest self declaration. There maybe some benefits for you also if you are a Hong Kong national so as not to get taxed twice. I think you need to resolve your personal situation – and suggest please contacting our Hong Kong office at hongkong@dezshira.com to speak with them – ask for Jennifer Lu – and discuss what to do about your China tax liabilities with you.
    Regards – Chris

  • Thank you all for your questions and comments.

    Since this article is from January 2012, I’d ask that all further questions be posted on our more recent and up-to-date article on the same subject published in January 2013.

    http://www.china-briefing.com/news/2013/01/14/china-expat-tax-filing-and-declarations-for-2012-income.html

    Thanks again for reading! Comments on this article have been closed.

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