IIT Reform 2018
On August 31, 2018, the Chinese government passed the new reforms on IIT Law which categorized residents and non-resident individuals for tax purposes. According to the new IIT law, a foreigner becomes a tax resident if he or she resides in China for 183 days or more per tax year (January 1 – December 31). On the other hand, he or she is otherwise treated as a non-resident for staying in China for less than 183 days.
If a foreign individual is considered a resident taxpayer, both China-sourced and non-China sourced income will be subjected to China’s Individual Income Tax. Otherwise, if he or she is a non-resident taxpayer, then his or her China-sourced income will only be subjected to IIT.
The IIT reform also includes the amendment from the five-year rule to six-year rule for tax residents. The new regulation extends the five-year tax exemption on foreign income to six consecutive years. This means that an individual is exempt from paying non-China source income tax if he or she has been in China for six years. It should be noted, however, that the individual should be outside China for more than 30 days in a single trip during the six-year period.
Furthermore, the new IIT system that took effect on January 1, 2019, allowed taxpayers to receive additional tax deductions in the form of the Special Itemized Deductions. The introduction of these additional deductions creates a more standardized Chinese IIT system that aligns with international practices.
Download our comprehensive report on the new IIT Reform Law here.
How to use the online tax app for IIT return
Through the online personal income tax app of China’s State Taxation Administration, individual taxpayers in China were able to claim their additional tax deductions since January 2019. Meanwhile, the tax refund service of the app will be available from March 1st. Taxpayers can take advantage of the service when making tax inquiries or other related tax payments. Below are the steps on registering for the app and checking payments.
1. Download the online tax app by scanning the QR code below (for Android users).
Or, you can search 个人所得税 on the Apple Store.
2. Select the city or region where you registered your residence.
3. You have the option to choose which way you want to register. Choose the second option which is face recognition registration.
4. Complete your identity information including certificate type, ID number/passport number, name, nationality and enter the verification code.
5. Enter relevant details such as username, password, phone number, verification code, and household registration region.
6. Choose the third option service for your income tax details inquiry under the common business section.
7. Select the tax year and type of personal income.