Your Individual Income Tax: all you ever wanted to know about filing your taxes in China and never dared to ask
Are you working and living in China? Have you ever thought about your tax duties? If you earn income, you are most likely subjected to individual income tax in China. Navigating the taxation system in the P.R.C. can be quite difficult, especially if you are not a tax expert. Plus, as each person’s tax situation is unique, seeking professional advice is always recommended. You do not want to miss a deadline, or to pay a wrong sum.
With this post, S.J. Grand provides you with an overview of the Individual Income Tax in China focusing on how to file it after 2017’ tax return reform. Also, to make sure you get an idea of your personal payable tax, we recommend to try our Individual Income Tax Calculator out.
Who pays the personal income tax in China?
According to the taxation system in China, Chinese citizens are considered to be domiciled in China as they have economic and personal ties in the country. Therefore, they must always include their worldwide income in the tax filing.
For foreigners (citizens from Hong Kong, Taiwan, and Macau are also regarded as foreigners) considerations vary according to three different aspects:
- The source of an individual’s income;
- Whether an individual is domiciled in China under Chinese law for tax purposes; and
- The length of his/her stay in China.
Foreigners staying in China less than one year
If you are staying in China for less than 183 days in a calendar year, you will not be taxed in the P.R.C. (but you will in your home country). In the case your home country does not hold a double taxation agreement with China, the period is reduced to 90 days.
Foreigners staying in China for one year (or more, but less than five)
Staying in China for more than 183 days (or 90 days, as per the above) makes you a China tax-resident. You are subjected to Chinese taxation, but Chinese Tax Authorities will most likely not consider you as domiciled (if the center of your economic and personal life is still not China) and you will not be liable for worldwide income taxation in China.
Foreigners staying in China for more than 5 years
If the period of your stay exceeds 5 consecutive years, you become fully taxable for your worldwide income in China and you must include it in the annual income filing.
Read our article about China’s 5-Year Tax Rule to understand how to legally escape taxation of your worldwide income.