Individual Income Tax for Foreigners (Foreigners Working and Staying in China) Personal income tax for foreigners

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  1. Determination of Tax Liability

For foreign individuals who have no residence in China but work in China, the determination of their tax liability is based on the length of residence in China and the specific circumstances of the employed organization in a tax year.

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  1. Determination of tax liability for a period of residence not exceeding 90 days or 183 days.

Individuals who have no residence in China but work in China for not more than 90 days continuously or cumulatively in a tax year or reside in China for not more than 183 days continuously or cumulatively during the period specified in the above-mentioned agreement are exempted from filing individual income tax returns for wages and salaries paid by employers outside China and not borne by the employer’s institution in China.

  1. Determination of tax liability for a period of residence exceeding 90 days or 183 days but less than one year.

Individuals who have no residence in China but work continuously or cumulatively in China for more than 90 days in a tax year or reside continuously or cumulatively in China for more than 183 days during the period specified in the above agreement but less than one year, and whose income from work salary paid by an enterprise or individual employer in China and paid by an enterprise or individual employer outside China during the period of actual work in China shall be declared and The individual income tax should be declared and paid.

  1. Determination of tax liability for a period of residence of one year but not more than five years.

Individuals who have paid no residence in China but have resided in payment for one year but not more than five years should declare and pay individual income tax on their work salary obtained during their work in China paid by enterprises or individual employers in China and paid by enterprises or individual employers outside China.

For the work salary earned during the temporary absence from China, only the part paid by the enterprise or individual employer in China should be declared and taxed.

For those who have earned wages and salaries in a month both during the period of work in China and during the period of temporary departure paid by domestic enterprises or individual employers, they should combine the tax payable for that month and declare and pay individual income tax according to the period stipulated in the tax law.

 

  1. Tax liability for residence for more than 5 years.

Individuals who have resided in China for 5 years refers to individuals who have resided in China for 5 consecutive years, i.e. 1 year in each tax year in 5 consecutive years.

After an individual has resided in China for 5 years, he/she should file tax returns for income derived from within or outside China in each year from the 6th year onwards if he/she has resided in China for 1 year; if he/she has resided in China for less than 1 year, he/she should only file tax returns for income derived from within China in that year.

 

II, Calculation of individual income tax on wages and salaries

  1. Wage and salary income.

It refers to the wages, salaries, bonuses, year-end salary increases, labor dividends, allowances, subsidies and other income related to employment obtained by an individual as a result of employment or employment.

2、Wage and salary income.

The taxable income is the balance of the monthly income less the standard deduction of expenses. That is: taxable income = monthly income – expense deduction standard.

3、 Expense deduction standard.

According to the provisions of the Individual Income Tax Law of the People’s Republic of China and its Implementing Regulations, the monthly expense deduction standard for individual income tax income from salary and wages is RMB 800, and foreigners can enjoy an additional deduction of RMB 3,200, so the expense deduction standard for foreign individuals is RMB 4,800/month.

 

III. Provisions on tax exemption

  1. Tax exemption for foreign individuals’ salary and wages

The salary and wages of foreign correspondents of news agencies in China shall be taxed in accordance with the provisions of foreign personal income tax laws. If they request for tax exemption, they should be exempted from personal income tax on the basis of the principle of reciprocity, i.e. if the other country explicitly exempts our correspondents from personal income tax, we shall also exempt their correspondents from personal income tax in China. However, this must be done through diplomatic channels. (Reply of the Ministry of Finance and the General Administration of Taxation on Several Issues Concerning the Collection of Individual Income Tax [80] Cai Shui Wai Zi No. 48)

  1. Tax exemptions for allowances and subsidies received by foreign individuals

(1) Housing, food allowance and laundry fee.

Reasonable housing allowance, meal allowance and laundry fee obtained by foreign individuals in non-cash form or in the form of actual reimbursement are exempted from individual income tax. The taxpayer shall provide the competent tax authority with the valid documents of the above-mentioned subsidies when filing the tax return of salary income in the month following the month in which the above-mentioned subsidies were first received or the amount and payment method of the above-mentioned subsidies changed, and the competent tax authority shall approve and confirm the exemption.

(2) Relocation expenses.

Relocation income obtained by foreign individuals in the form of actual reimbursement due to their employment or separation from service in China is exempted from individual income tax. It should be provided by the taxpayer with valid proofs, and the tax exemption shall be approved and confirmed by the Chinese taxation authorities in respect of the reasonable portion thereof.

(3) Business trip allowance.

The domestic and foreign business trip subsidies obtained by foreign individuals at reasonable standards are exempted from personal income tax. The tax exemption shall be confirmed by the competent taxation authority upon the taxpayer’s provision of proofs (copies) of transportation and accommodation expenses for the business trip or the relevant plan of the business trip arranged by the enterprise.

(4) Expenses for visiting relatives.

Individual income tax exemption is granted to the family visit expenses obtained by foreign individuals. In addition, the amount of family visit expenses that can enjoy preferential personal income tax exemption is limited to the expenses for foreign individuals to take transportation between their place of employment and their family place (including the residence of spouse or parents) in China and not more than twice a year.

(5) Subsidies for language training fees and children’s education fees.

The language training fee and children’s education fee allowance obtained by foreign individuals are exempted from personal income tax. The taxpayers shall provide proofs of expenses and documents proving the duration of the above education in China, and the competent taxation authorities shall examine and exempt the reasonable part of them.

  1. Exemption from personal income tax for interest, dividend and bonus income received by foreign individuals

(1) The income from dividends and bonuses received by foreign individuals from foreign-invested enterprises shall be exempted from personal income tax. (Circular of the Ministry of Finance and the State Administration of Taxation on Certain Policy Issues of Individual Income Tax, Cai Shui Zi [1994] No. 0202)

(2) Foreign individuals holding B shares or overseas shares (including H shares) shall be exempted from personal income tax for the time being on the dividend (bonus) income received from the Chinese domestic enterprise issuing such B shares or overseas shares. (Letter from the State Administration of Taxation Issues Relating to Dividends Received by Foreign Individuals Holding Shares of Listed Companies in China Guo Shui Fa [1994] No. 440)

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