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Individual Income Tax of Foreign Nationals in China
With the accelerating step of economic globalization and the expansion of Multinational Corporation, foreign nationals in growing numbers come to work in China. The issue on the individual income tax of foreign nationals in China is paid more and more attention. Now, combining the Chinese tax policy, we will briefly analyze the issue on the individual income tax of foreign nationals in China.
In accordance with Individual Income Tax Law of the People's Republic of China, individual income tax shall be levied in accordance with the provisions of this Law by individuals who have domicile in China, or though without domicile but have resided for one year or more in China on their income derived from sources within and outside China. Individuals who are neither domiciled nor resident in China, or who are not domiciled and reside for less than one year in China, shall pay individual income tax in accordance with this Law on income derived form sources within China. Namely, whether or not foreign national have domicile in China or whether have resided for one year in China decides their tax base.
In levying practice, Chinese tax authority take whether individuals have household register as a standard for whether they have domicile in China. Foreign nationals shall belong to the individuals without domicile. The term "have resided for one year or move in China" shall mean to have resided within the People's Republic of China for 365 days 1 in a Tax Year. Besides the working time of foreign nationals in China, definition on income derived from sources within China and from sources outside China is also the key to decide their tax base.
The wage and salary gained by individuals during the period of actual work within China which are paid by enterprises or individual employers whether inside or outside China, all belong to incomes originate from within the territory of China. The wage and salary gained by an individual during the period of actual work outside China, which are paid by enterprises or individual employers whether inside or outside China, all belong to incomes originate from outside China.
The period of actual work within China shall include public holidays, personal vacations and training days in and outside China during the period of work within China; The period of work outside China means the period of time work in overseas business establishment and performance the position abroad or provide labor services on overseas business premises, as well as the public holidays during this time.
Tax policies offer tax preference to the foreign nationals who reside in China for a shorter time according to concrete conditions. Foreign national tax payers within a tax-paying year, live continuously or for an accumulated period of no more than 90days within the territory of China, or the State of nationality of foreign national has the tax agreement with China, who live continuously or for an accumulated period of no more than 183 days within the territory of China during the period as set in the tax agreement. The above-mentioned individuals shall declare tax payment for the wage and salary incomes gained during the period of their actual work within China, which are paid by the enterprises or individual employers or borne by the organizations within the territory of China. The wage and salary income paid by an employer outside the People's Republic of China, and which is not borne by the employer's establishment or business place within the People's Republic of China, shall be exempt from individual income tax. This kind of tax preference does not apply to directors and high- level managerial personnel within China.
The position of high-level manager of the enterprises within China means the company manager and deputy manager, all functional leaders, director and other positions similar to high-level managers of a company. For individuals who take the post as directors or high-level managers of the enterprises within China, the director fees or wage and salary gained by them and paid by the enterprises within China, the tax preferences are not applicable to them, shall declare payment of individual income tax no matter whether or not they perform their duties outside China during the period from the day they hold the position as directors or high-level managers of the enterprises within China to the day when they terminate the above-mentioned post; they shall perform the tax paying obligation as general foreign nationals on the wage and salary gained by them and paid by the enterprises outside China.
In short, Foreign nationals whoever work in China, no matter how long they work in China, shall pay tax for their wages and salaries paid by enterprises or individual employers inside China or borne by the organizations within the territory of China. Foreign nationals, in the tax-paying year, who live continuously or for an accumulated period not more than 90 days or live continuously or for an accumulated period exceeding 183 days within the territory of China during the period specified in the tax agreement, shall pay tax for all income derived from sources within China; Foreign nationals have lived in China for a full year，no matter whose income derived from sources within China and outside China, shall pay individual income tax in China. Besides above-mentioned stipulations, China offers other individual tax preference to foreign nationals engage in special industries and fields. As for the concrete stipulations, clients can consult related consultative agency.
1 No deductions shall be made from that number of days for tax payer's Temporary Trips out of the People's Republic of China for not more than 30 days during a single trip, or not more than a cumulative total of 90 days over a number of trips, within the same Tax Year.
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