What to Know Before Quitting Your Job in China – Guide for Foreign Employees
Terminating employment in China as a foreigner is not as straightforward as it may seem. There are several procedures and steps that need to be completed, whether you are planning on changing jobs in China or leaving the country altogether. We provide a step-by-step guide for foreign workers to quit their jobs in China and offer advice on how to claim pension, medical, and housing insurance payments. 2022 has been a challenging year for foreigners working in China. China’s economy has experienced ups and downs as the country grappled with multiple COVID-19 outbreaks and continued geo-political tensions. Some cities have been hard-hit by supply chain disruptions, and many businesses have been forced to adjust their business strategies. Under these circumstances, expats are also reconsidering their career paths. They may be more inclined to change employer, seek opportunities in another city, or even consider leaving China. However, changing jobs in China or leaving China may not be as straightforward as many people imagine, due to the comparatively strict rules for foreigners to work in China. There are a series of formalities that you must go through to continue working in China legally or leave China without any future concerns. In this article, we provide a step-by-step guide for foreigners who plan to terminate their current employment.
Cancellation of Foreigner’s Work Permit
If you want to work in China as a foreigner, you must obtain a Foreigner’s Work Permit before you can start work. The Foreigner’s Work Permit is also the first document that must be canceled upon termination of employment. Even if you are simply transferring to a new employer in the same city, you must still cancel your current Foreigner’s Work Permit so that you can apply for a new Foreigner’s Work Permit under the new employer. Generally, the employer handles the cancellation of the Foreigner’s Work Permit. The documents required to cancel the Foreigner’s Work Permit include:
- One original copy of the Application Form for the Cancellation of Foreigner’s Work Permit
- One original copy of the certificate of the terminated employment relationship, terminated contract, or other certifying materials demonstrating the reasons for the cancellation
- Supplementary materials required by the local government
It is important to cancel the work permit in a timely manner after the employment has been terminated. In our experience, delays in canceling a work permit can hinder future applications for a stay visa, and can even result in penalties. In case of the applicant’s death, incapacity, or early termination of the contract or employment relationship, the employer must apply for the cancellation of the work permit to the authority in charge within 10 working days of the date when the employment relationship was terminated. The reason for the cancellation of the work permit will be included on the cancellation certificate. After obtaining the work permit cancellation certificate, the next step is to cancel the Foreigner’s Residence Permit.
Cancellation of Foreigner’s Residence Permit
After receiving the cancellation certificate of the Foreigner’s Work Permit, you can make an appointment to cancel your Residence Permit at the entry-exit department of the local public security bureau. The Residence Permit is a document that gives foreigners the right to live in China and allows them to travel in and out of China as regularly as they require. The documents required to cancel the residence permit include:
- Application form for a stay permit
- Color photo and receipt of a China visa photograph for foreigners
- The applicant’s passport
- The applicant’s Foreigner’s Work Permit
- Cancellation certificate of the Foreigner’s Work Permit
- Temporary Residence Registration Form
- Documents for termination of employment/contract
You must submit the documents in person. The authorities usually will issue you with a 30-day stay visa to give you time to settle personal matters.
Further actions for foreigners who terminate their employment in China
If you decide to leave China and do not expect to pursue future employment in China, you are also advised to take the following courses of action.
Cancellation of Social security scheme
According to Article 5 of the Interim Measures for the Participation in Social Insurance of Foreigners Employed in China, foreigners who leave China before reaching retirement age can have their social insurance personal account savings paid to them in a lump sum upon their written application to terminate their social insurance participation. When terminating your employment and leaving the country, you can apply to the local social security bureau in which you are enrolled to terminate your social insurance participation and settle the amount in your personal social insurance account. The part of your pension and medical insurance that you contributed as an individual, and a percentage of your employer’s contribution, is paid into your personal account. You can then withdraw the balance of the personal account in a lump sum after your employer has completed the required procedures.
- The applicant’s passport
- The applicant’s local bank card (recommend financial social security card)
- Power of attorney (if applicable)
The specific application procedure varies from city to city. For more details, please read our China Briefing article on How Foreigners Can Claim Social Insurance Payments When Leaving China.
Cancellation of the housing fund scheme
Although expatriates are generally not required to contribute to the housing fund scheme, some companies still contribute to it on behalf of their expatriate employees as an employee benefit. According to Article 24 of Regulations on the Housing Provident Fund, employees may withdraw the balance of deposits in their housing fund accounts if they have decided to settle abroad, among other circumstances. After withdrawing the funds, the housing fund account of the employee will be closed. In some cities, like Shenzhen and Guangzhou, you can simply log on to the official WeChat account of the local Housing Provident Fund Management Center. Here, you just need to select the “Exit Settlement Withdrawal” module, fill in the relevant information, and submit. The authorities will review the application online. After the application has been approved, you can go to the reservation counter of the housing fund bureau with the relevant materials. For cities that do not have this online service, you can instead go to the local housing fund management center with application materials to apply for the housing fund withdrawal. The documents required include:
- The applicant’s passport
- Documents for termination of employment/contract, or other supporting documents
- The applicant’s local bank card
- Other documents (dependent on the city’s local policies)
Individual income tax reconciliation
When a foreign employee joins a company, HR will usually pre-assess the number of days the employee will stay in China throughout the year to decide the employee’s tax residence status. If the actual situation is inconsistent with the pre-assessment, either the employer or the employee will have to make tax settlements, and will be required to pay more (or less) tax, as a change in the tax residence status will result in a different individual income tax (IIT) liabilities. Foreign employees who have resided in China for 183 days or more within a tax year are considered resident taxpayers, while those who have resided in China for less than 183 days within a tax year are non-resident taxpayers. For resident taxpayers, the IIT on their comprehensive income – income from wages and salaries, remuneration for labor services, author’s remuneration, and royalties – is subject to yearly calculation. The taxable income amount of the comprehensive income of a resident individual shall be the balance after deduction of the standard deduction (RMB 60,000 per year), as well as other deductions pursuant to the law, from the income amount of each tax year. The comprehensive income is subject to a progressive tax rate of three to 45 percent, as is shown in the below table:
|IIT Rates Table for Resident Individuals (Yearly)|
|Tax bracket||Annual taxable income (RMB)||Tax rate||Quick deduction (RMB)|
|2||36,000 – 144,000||10||2520|
|3||144,000 – 300,000||20||16920|
|4||300,000 – 420,000||25||31920|
|5||420,000 – 660,000||30||52920|
|6||660,000 – 960,000||35||85920|
For non-resident taxpayers, IIT on different incomes is calculated separately for each time or each month when you receive the income. The taxable income amount for income from wages and salaries of a non-resident individual is the balance after the deduction of the standard deduction (RMB 5,000 per month), as well as other applicable deductions. The IIT rates for non-resident taxpayers are generally equal to those for resident taxpayers. However, since the rates are calculated on a monthly basis, they are based on the following brackets instead:
|IIT Rates Table for Non-resident Individuals (Monthly)|
|Tax bracket||Monthly taxable income (RMB)||Tax rate||Quick deduction (RMB)|
|2||3,000 – 12,000||10%||210|
|3||12,000 – 25,000||20%||1410|
|4||25,000 – 35,000||25%||2660|
|5||35,000 – 55,000||30%||4410|
|6||55,000 – 80,000||35%||7160|
Therefore, if you are a resident taxpayer at the beginning of the year but have resided in China for less than 183 days cumulatively within a tax year when you leave China, your IIT will need to be re-calculated on a monthly basis. This may result in you needing to pay more in tax. Conversely, if you were categorized as a non-resident taxpayer at the beginning of the year but have resided in China for 183 days or more cumulatively within a tax year when you leave China, your IIT needs to be re-calculated on the basis of annual comprehensive income as well. This may lead to you having to pay less tax.If applicable, you should complete the annual IIT reconciliation. The period for annual IIT reconciliation is from March 1 to June 30 of the following year. Non-resident taxpayers who leave China before March 1 may complete the annual IIT reconciliation before their departure. You can complete annual IIT reconciliation and tax refunds online through the Individual Income Tax System (which includes a mobile app and a website) or offline by yourself. Alternatively, you can entrust a professional service agency to do it on your behalf. Since the knowledge involved in IIT calculation for foreigners is relatively complicated, it is recommended that you apply for a QR Code in the IIT system at the local tax office and complete the registration in advance so you can make IIT adjustments via the online system if necessary. The documents required include:
- The applicant’s passport (for QR Code application)
- QR Code for the IIT system (apply at the tax bureau)
- The applicant’s local bank card
As you will not have much time left in the country after transferring your residence permit to a stay visa, it is important to plan well in advance to ensure enough time to complete all the necessary procedures. As many services can be handled online, it’s important that you make the necessary preparations for the various processes, such as keeping a China bank account to receive any refunds if necessary. For assistance with the procedures mentioned in this article, please contact our Dezan Shira & Associates professionals at China@dezshira.com.
About Us China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at firstname.lastname@example.org. Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Russia, in addition to our trade research facilities along the Belt & Road Initiative. We also have partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh.
- Previous Article 2023 Import-Export Tariffs in China
- Next Article China Appoints New Foreign Minister