Individual Income Tax for Expats

Individual income tax is a common concerns foreign expats living or working in China. With the further advancement of globalization, there is an increasing amount of foreigners coming to China each year. It’s important for foreign people to know when they will be subject to the income tax and compliance requirements in China as there are many different categories of income recognized by China’s Individual Income Tax (IIT) Law. In the exposition below, Tannet introduces the frequently searched questions connected with individual income taxation in China.
  
Which kind of foreigners are subject to Individual Income Tax?
A foreign national could be a resident if the person resides in China for one full year, without a single period of absence for more than 30 days consecutively or cumulative periods of absence for more than 90 days within the same calendar year. The above, in combination with an individual’s duration of stay in China, his/her source of income, and where the salary payments are settled determine the basis on which IIT is levied.

Taxable Incomes for foreign individuals
1. Living in China less than 90 days (183 days if there is a tax treaty in place)
Income sourced within China;
Income paid by overseas employer (not borne by its Chinese operation) is exempt.

2. Living in China more than 90 days (183 days if there is a tax treaty but less than one year)
Income sourced within China;
Income sourced outside China is not subject to IIT, unless the taxpayer is a director or senior manager of a Chinese domestic enterprise.

3. Living in China between one and five years
Income sourced within China;
Income sourced outside China paid by a Chinese enterprise or individual.

4. Living in China more than five years
Income sourced within and outside China from the sixth year onwards for every full year spent in China.

Requirements for individual income tax returns
The annual tax year ends on December 31. Individual income tax returns are due by March 31 of the following year. A foreign national who is a full-year resident with annual income greater than RMB120,000 is required to file an annual individual income tax return even if taxes have been properly withheld and paid on a monthly basis and no additional tax liability is due on the annual return.

The employer is responsible for filing individual income tax withholding returns on a monthly basis and remit tax payments to government agencies by the 15th day following the month an employee receives the income.

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