Individual income tax in China is a complex subject, and changes to the system often occur. The information in this article is the most up-to-date that we have. As with a lot of things in China, changes can happen quickly and we strongly urge those in need of tax advice to seek out professionals who will be aware of any changes to the tax regime.
Expatriates should be aware that newcomers must register for income tax, work visas and residence permits, and those expats who worked in China during 2011 must still report separate annual IIT filings in addition to their monthly tax returns. There are financial penalties if this is not carried out for both sets of expat.
China has a multi-tiered system of tax liabilities for foreigners, which has lead to some confusion, particularly over the so-called 90 or 183 days rule. For those sent to China by a foreign company, who have their salary paid elsewhere (probably in their home country), and spend more than 183 days of a calendar year in China (or 90 if they are from a country that does not have a double tax treaty with China), they need to pay IIT in China based on the number of days they effectively spent in the country.
New-to-China expatriates with full time employment here need to make sure they are in compliance with income tax China. The onus is on the individual to ensure this, and fines can be levied and passports censured if this is not carried out. Newcomers need to obtain a work visa, residence permit and register for income tax upon commencing or signing contracts. The employer should arrange this for the employee. This is a serious issue and only gets potentially worse every month it is ignored. At some point, when an individual's stay in China ends, they will have to reconcile with the authorities over their income. Immigration records, visa type and length of stay information are shared between the immigration authorities and the tax bureau. Those in doubt over their situation should seek a professional who can assist.
For more information, please contact us about income tax in China
