Foreign personal income tax

Personal Income Tax Policy for Foreigners in China

Q1. How shall the foreign individual’s obligation to pay tax in the People’s Republic of China be determined?
 

A1. Whether the foreign individual is a resident taxpayer or non-resident taxpayer shall be the main consideration for determining his obligation to pay tax in the People’s Republic of China. Residents have full obligation to pay personal income tax and non-residents only have partial obligation.
 
Q2. How shall the non-resident taxpayer’s obligation to pay tax in the People’s Republic of China be determined?
 

A2. Individuals who are neither domiciled nor resident in the People’s Republic of China, or who are not domiciled and reside for less than one year in the People’s Republic of China are defined as non-resident taxpayers. The specific obligations to pay tax are as followings:
(1)  For the individuals who are not domiciled in the People’s Republic of China, but who reside inside the People’s Republic of China consecutively or accumulatively for not more than 90 days or for not longer than the period regulated in the tax treaty in any one tax year, belonging to the domestic temporary residents, and who don’t take on regular posts in a permanent establishment within the People’s Republic of China, personal income tax may be paid on only that part which was paid by domestic enterprises, individuals, establishments or business place within the People’s Republic of China during their actual working period inside the People’s Republic of China.
(2)  For the individuals who are not domiciled in the People’s Republic of China, but who reside inside the People’s Republic of China consecutively or accumulatively for more than 90 days or for longer than the period regulated in the tax treaty in any one tax year, their income derived from sources within and outside the People’s Republic of China during their actual working period inside the People’s Republic of China shall be subject to tax.
 
Q3. How shall the resident taxpayer’s obligation to pay tax in the People’s Republic of China be determined?
 

A3. Individuals who are domiciled in the People’s Republic of China, or who are not domiciled but have resided in the People’s Republic of China for one year are defined as resident taxpayers. The specific obligations to pay tax  are as followings:
(1)  Individual income tax shall be levied by individuals who have domicile in the People’s Republic of China on their income derived from sources within and outside the People’s Republic of China.
(2)  Individual income tax shall be levied by individuals who are not    domiciled in the People’s Republic of China but resident for more than one year and less than five years on their income derived from sources within and outside the People’s Republic of China during their working period inside the People’s Republic of China and on their income derived from sources within the People’s Republic of China during their working period outside the People’s Republic of China.
(3)  Individuals who are not domiciled in the People’s Republic of China, but who reside for more than five years shall, commencing from the sixth year, file tax returns and pay individual income tax on the whole amount of income derived from sources within and outside the People’s Republic of China.
 
Q4.Which income the foreign individuals gain shall be deemed to be the income derived from sources within the People’s Republic of China and be levied individual income tax in accordance with provisions of tax law?
 

A4.The income the foreign individuals gain, the place of whose payment is inside the People’s Republic of China, shall be deemed to be the income derived from sources within the People’s Republic of China .But the following income, whether the place of payment is inside the People’s Republic of China or not, shall be income derived from sources inside the People’s Republic of China.
(1)  Income from personal services provided inside the People’s Republic of China because of the tenure of an office, employment, the performance of a contract ,etc.;
(2)  Income from the lease of property to a lessee for use inside the People’s Republic of China;
(3)  Income from the assignment of property such as buildings ,land use rights ,etc. inside the People’s Republic of China or the assignment inside the People’s Republic of China of any other property;
(4)  Income from the licensing for use inside the People’s Republic of China of any kind of licensing rights;
(5)  Income from interest, dividends and extra dividends derived from companies, enterprises and other economic organizations or individuals inside the People’s Republic of China.
 
Q5. Besides enjoying the general preference of individual income tax, which special preferential treatment can be enjoyed by the foreign individuals?
  
A5. (1) For income obtained by foreign individuals from wages and salaries, a monthly deduction for RMB 4800 shall be allowed for expenses.
   (2) The following income obtained by foreign individuals shall be exempt from individual income tax temporarily:
a. the housing ,meal, housing transfer and cloth washing allowance are exempt, provided they are not paid by cash and the amount is in proof of invoice;
b. the allowance of trip at home and abroad are exempt, provided they are paid in rational standards;
c. the home leave fare, educational expense for children, language training expense are exempt, provided both the amount of fare and the frequency each year are considered reasonable by the tax authority;
d. incomes obtained by foreign individuals from dividends and extra dividends derived from foreign-invested enterprise are exempt.
 
Q6.Which types of foreign experts are exempt from paying individual income tax on their wages and salaries?
 

A6. a. the foreign experts sent directly to the People’s Republic of China to work by World Bank in accordance with World Bank's specific item loan agreement;
    b. the foreign experts sent directly to the People’s Republic of China to work by the UN organizations;
    c. the expert who come to the People’s Republic of China to work for the aid program of the United Nations;
    d. The expert sent to the People’s Republic of China by aid-giving countries to work for the program of aid given gratis of the aid-giving countries;
    e. the culture and education experts who come to the People’s Republic of China to work within two years because of the cultural exchange program signed by the governments of the People’s Republic of China and the related country, whose income from wages and salaries were borne by that country;
    f. The culture and education expert that come to China to work within two years because of the international exchange program of universities and colleges of China, whose income from wages and salaries were borne by that country;
    g. the expert who come to the People’s Republic of China to work through the folk scientific research protocol, whose income from wages and salaries is borne by the government of the related country;
 
Q7. Shall the income tax paid to foreign tax authorities by the foreign taxpayer on income derived from sources outside the People’s Republic of China be allowed as credit against the amount of income tax payable?
 

A7.  If the actual amount of individual income tax paid by a foreign taxpayer in a country or region outside the People’s Republic of China is less than the limit for deductions for that country or region computed in accordance with the provisions of the tax law of the People’s Republic of China, the income tax paid to foreign tax authorities by the foreign taxpayer on income derived from sources outside the People’s Republic of China shall be allowed as credit against the amount of income tax payable; if the amount exceeds the limit for deductions for that country or area, the excess portion may not be deducted from the amount of tax payable for that tax year; however, such excessive portion may be deducted from any unused portion of the limit for deductions for that country or region during subsequent tax years, for maximum period of five years.
 
Q8.  Which special regulations are applicable to the individual income tax of foreign top management personnel?
 
A8.  The term “foreign top management personnel” shall mean foreign personnel undertaking a post of chief manager, vice (general) manager, general instructor or director of every functional department, or undertaking other types of posts of management in enterprise inside China.
Irrespective of whether the foreign personnel undertaking a post of general director or top management in enterprise in the People’s Republic of China perform the duty of their post outside the People’s Republic of China or not, they should file tax returns and pay individual income tax on the director fee or the salary which is paid by the enterprise inside the People’s Republic of China from the day they undertake the post of general director or other top management in the enterprise inside the People’s Republic of China to the day they are removed from their post. For the income paid by the enterprise outside the People’s Republic of China during the period of their working outside the People’s Republic of China, they cannot free from paying tax like ordinary personnel just because they are non-resident.
If the foreign individual gains the director fee from undertaking a post of general director, individual income tax should be paid according to the tax item of “income from remuneration for personal service”. If the foreign individual gains the income from undertaking a post of direct management, which bear no relevance to the post of general director, individual income tax should paid according to the tax item of “income from wages and salaries”. The general director of a FDI (Foreign Direct Investment)enterprise who undertakes a post of direct management as well, or who does not undertake a post of direct management in name but engages in daily enterprise management in fact, should be determined as the one has dual identity of director (general director) and employee in the enterprise ,and individual income tax shall be paid or exempt respectively on the director fee, the salaries, the dividends and extra dividends ,which are divided from the income , according to the existing tax law of the People’s Republic of China.
 
Q9. Which special regulations are applicable to the individual income tax of the foreign personnel in the representative institution stationed in the People’s Republic of China?
 
A9.  Individual income tax should be paid when the foreign personnel working in the representative institution stationed in the People’s Republic of China by virtue of their tenure of an office or employment obtain income, which shall be the income derived from sources inside the People’s Republic of China no matter the income is paid or borne by the enterprise inside the People’s Republic of China or by the enterprise outside the People’s Republic of China, from offering personal service in China. And if the representative institution stationed in China adopts the method of counting and paying enterprise income tax by assessing the amount of its profit or the one without any operating income free from paying enterprise income tax, the income from wages and salaries obtained by its employees during their actual working period inside the People’s Republic of China shall be deemed to be paid or borne by the representative institution stationed in the People’s Republic of China, irrespective of whether the income has been recorded in its accounting book or not.  .
 
Q10.  Which regulations are applicable to the individual income tax of foreign actors and athletes?
 
A10.a. If foreign, Hong Kong, Macao and Taiwan actors and athletes engage in art and sports performance in the People’s Republic of China (mainland) in the name of a group, the performance group should withhold and remit the tax on the remuneration obtained by the actors or athletes which is actually paid by the performance group. If the actors or athletes are hired temporarily not the employees of the group, the individual income tax shall be levied on the remuneration obtained by the actors or athletes, which is actually paid by the performance group, after the deduction of prescribed expenses according to the tax item“income from remuneration for personal service”. If the actors or athletes are the employees of the group, the individual income tax shall be levied on the remuneration obtained by the actors or athletes, which is actually paid by the performance group, after the deduction of prescribed expenses according to the tax item“income from wages and salaries”. If the group fails to report the remuneration paid to the actors and athletes or fails to withhold and remit the individual income tax while paying enterprise income tax, the taxable income of the group shall be assessed at the profit rate of 70%, and the enterprise income tax and local income tax shall be levied for the group with the individual income tax not being levied any longer for the actors and athletes. 
b. If foreign, Hong Kong, Macao and Taiwan actors and athletes gain income by engaging in art and sports performance in the People’s Republic of China (mainland) in the name of a group, the business tax shall be levied at a rate of 3% on their business turnover, which is the amount remaining from the gross ticket income or income from booking all or most of the seats in the theatre or cinema after the fee which is paid to unit or performance company offering show site and the expenses of broker has been deducted; individual income tax shall be levied under the tax item of “income from remuneration for personal service” in accordance with the relevant regulations of the individual income tax law.
c. The actors and athletes should report and pay individual income tax on the remuneration derived from performing at one place to the competent taxation authority ,which is located at the place of stage performance. In case of income from remuneration for personal services and the actors and athletes give several performances at one place, the amount of the taxable income shall be the total income derived from giving several performances at one place and subject to individual income tax.
 
Q11.How do foreign individuals file tax returns and pay individual income tax?
 
A11. The withholding agent of the foreign individuals should withhold individual income tax while paying the taxable income to the foreign individuals and record it for reference specially; if the withholding agent does not exist, the foreign individuals should file tax returns and pay the individual income tax by themselves to the competent tax authority which is located at the place where the foreign individuals derive income, and they should turn over the tax payable to the national treasury within the first seven days in the next month. If the withholding agent or the taxpayer fails to file tax returns and pay tax, it will be dealt with in accordance with the regulations of “Management Act for Tax Administration and Collection”.
 

Q12. How shall tax payment place be determined if the foreign individuals derive income in two or more places?
 
A12.  The tax payment place shall be determined as the actual working place where the tax payer, who comes to the People’s Republic of China temporarily and obtains income from working or offering service at several places in the People’s Republic of China, is within the stipulate period of tax report in accordance with uniform regulations of the tax law, namely: the taxpayer should file tax returns at the place where he is within the period of tax report.
 
Schedule of the amount of taxable income and applicable tax rates of the foreign individual income tax
Categories of taxable income Amount of taxable income

Applicable tax rates
Income from wages and salaries A monthly deduction of RMB 4800 shall be allowed for expenses and that part in excess of RMB 4800 shall be taxable income  Progressive rates from 5% to 45%
Income from production or business operation derived by individual industrial and commercial households The amount remaining from the gross income in a tax year after the costs, expenses and losses have been deducted Progressive rates from 5% to 35%
Income from contracted or leased operation of enterprises or institutions The amount remaining from the gross income in a tax year after the deduction for expenses of RMB 800  Progressive rates from 5% to 35%
Income from remuneration for personal service A deduction of RMB 800 shall be allowed for expenses, if the amount received in a single payment is less than RMB 4000; For single payment of RMB 4000 or more, a deduction of 20% shall be allowed for expenses. The remaining amount after deduction shall be the taxable income A flat rate of 20%; For personal service is excessively high, additional tax can be levied at a rate of 50% or 100%
Income from author’s remuneration A flat rate of 20%,the amount of tax payable, however ,shall be reduced by 30%
Income from royalties 
 
A flat rate of 20%

Income from lease of property
Income from interest, dividends and bonuses The full amount received in each payment
Income from transfer of property The amount remaining from the gross transfer income after deducting the original value of the property and reasonable expenses
Contingent income The full amount received in each payment
Other income The full amount received in each payment
Note: The English version Guide is just for the reference. The local taxation authority shall be responsible for the interpretation of these Regulations. In case of discrepancy, the original version in Chinese shall prevail.