The Individual Income Tax in China (commonly abbreviated IIT) is administered on a progressive tax system with tax rates from 3 percent to 45 percent. As of 2019, China taxes individuals who reside in the country for more than 183 days on worldwide earned income.
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While Chinese nationals are taxed on their foreign earned income, foreign nationals are only taxed on their income earned from a Chinese source. That said, if a taxpayer has been a resident in China for more than five years, they will be required to pay taxes on their worldwide income.
How to determine if a foreign employee is subject to Chinese tax?
To determine whether a foreign individual working in China is subject to Chinese tax, it is necessary to look at how much time he or she has spent in China, what is the source of his or her income, and where his or her employer is based.
How does individual income tax work in China?
China’s Individual Income Tax (IIT) Law stipulates that all individuals working and deriving income from within the territory of China are subject to IIT. While Chinese nationals are taxed on all income sourced both domestically and overseas, non-Chinese nationals are only taxed on income deriving from within China.
Do you have to pay tax in China if you are non resident?
A non-resident individual residing in China for less than one year during the tax year is exempt from this requirement. China’s tax authorities have been stepping up anti-tax evasion measures in recent years, having improved investigation methods aimed at foreigners.
Are there any tax deductions for foreigners in China?
Foreign individuals employed in China are eligible to a standard deduction of RMB 4,800. On top of this, there are a number of allowances that may be deducted off an individual’s income, including the mandatory Chinese social security payments for foreigners.
