| riates on Business Trips to China | | | | calendar year), you will have to pay individual income |
| If you are sent to China by your company, your salary | | | | tax on your worldwide income. Fortunately, taxes paid |
| is paid outside of China, and you spend less than 183 | | | | overseas can be deducted from taxes payable to the |
| days in China in a calendar year, than you must pay | | | | Chinese tax authorities. It is whispered that this rule is |
| Chinese Individual Income Tax based on the days of | | | | rarely if ever enforced, however. |
| the year you spend in China (note that | | | | Work Permits |
| “China” for the purposes of this article | | | | Expatriates based in China must obtain a work visa, |
| excludes Hong Kong, Macau, and Taiwan). If you | | | | work permit, and residence card. You and your family |
| spend more than 183 days in China in any given | | | | will also have to register with the local police station. |
| calendar year, you will have to pay taxes on all | | | | You will need to take a medical exam at a designated |
| China-source income (income related to work | | | | local hospital in order to obtain these documents (this |
| performed in China). This 183-day threshold is reduced | | | | takes a couple of hours and results are usually issued |
| to 90 for nationals of countries that have no tax treaty | | | | on the same day or the day following). |
| with China. | | | | Tax Rates |
| Foreigners Working for Chinese Enterprises in China | | | | Chinese individual income tax rates are more steeply |
| (including joint ventures, wholly foreign owned | | | | graduated than in many nations, particularly the United |
| enterprises and representative offices) | | | | States. Of course this is good news if you have a |
| If you hold a position such as Chief Representative of | | | | relatively low income, but for those who come to |
| a representative office or General Manager of a | | | | China on lucrative expatriate salaries it might mean |
| Chinese LLC, wholly foreign owned enterprise or | | | | higher taxes. Employees are required to withhold |
| Sino-foreign joint venture, your individual income tax | | | | individual income tax from their employees’ |
| liability begins to accrue on the minute you step off the | | | | paychecks. |
| plane in China. If you hold such a position, even if you | | | | Note: Local tax bureaus apply formal and informal |
| do not visit China during the entire calendar year you | | | | standards as to what constitutes a |
| will still have to file a tax return reporting zero | | | | “reasonable salary” in a given industry. |
| China-source income (note that even though your | | | | Factors include position, education, and country of |
| salary in this case would be in exchange for | | | | origin. If they believe you are underreporting your |
| China-related work, it was not performed within | | | | income they can unilaterally raise your declared income |
| Chinese borders and thus is not considered | | | | to the standard and tax you accordingly. |
| China-source income). | | | | The first RMB 4,000 of salary is tax-free Total tax |
| According to the law you should declare the full salary | | | | liability can be calculated with the following formula: |
| for the position and pay individual income tax | | | | (Total Salary – RMB 4,000 X Graduated Tax |
| accordingly. In practice, however, it is common to see | | | | Rate) – Standard Deductible = Individual Income |
| foreigners declaring an "arranged" fixed salary for their | | | | Tax Liability |
| China position (with the rest being paid off-shore) and | | | | Up to RMB20,000 = 20% |
| pay taxes accordingly. This practice is illegal, and while | | | | RMB20,001-40,000 = 25% |
| it has been common practice in the past, it also puts | | | | RMB40,001-64,000 = 30% |
| the employer at risk. Fines of several million RMB have | | | | RMB60,001-80,000 = 35% |
| been assessed against foreign invested enterprises | | | | RMB80,001-100,000 = 40% |
| for tolerating such practices, and the risk of being | | | | Over RMB100,000 = 45% |
| caught is increasing. | | | | Note: The standard deductible has been omitted from |
| Foreigners Holding Concurrent Posts in China and | | | | the above. It graduates from a minimum of RMB 375 |
| Overseas. | | | | to a maximum of RMB 15,375. At the time of this |
| In this case you should arrive in China on a business | | | | writing, the exchange rate is approximately RMB8 = |
| visa, and you will be subject to individual income tax | | | | US$1. |
| based on the number of days physically present in | | | | Perks and Benefits |
| China. This is based on the total salary you are | | | | Many common expat perks and benefits are |
| claiming from your local position and from your | | | | nontaxable. |
| employer abroad. The Chinese tax bureau may want | | | | In general, expenses that you pay yourself (in |
| to see proof of earnings from your overseas | | | | exchange for local official invoices) with cash |
| employer (tax slips, payment vouchers, etc). At the | | | | allowances provided by your employer are taxable. |
| end of each month your China employer must take | | | | Expenses that your employer pays on your behalf |
| copies of your passport and pay taxes based upon | | | | (housing, etc.) are generally considered non-taxable. |
| the number of days you were physically present in | | | | Fixed housing allowances, hardship allowances, and |
| China. The tax bureau will issue a receipt, and this | | | | fixed expenses paid in cash are generally taxable, |
| amount can be credited against the tax paid in your | | | | while provided housing at cost, free use of a vehicle, |
| resident location (ie: you won't have to pay tax both in | | | | home leave allowances, educational allowances for |
| China and your resident location for the time spent in | | | | dependents, and reimbursed expenditures are |
| China as long as your country has a tax treaty with | | | | generally nontaxable as long as the amounts are |
| China). | | | | considered “reasonable”. |
| Chinese Residency and Taxation of Your Worldwide | | | | Penalties |
| Income | | | | Penalties for late payment, non-payment and other |
| If you are deemed a “tax resident” by | | | | violations are often up to five times the amount due |
| the Chinese government (possible if you have stayed | | | | (plus the overdue amount). More serious penalties for |
| in China for more than 5 years without residing outside | | | | employers in case of intentional, systematic or |
| the PRC for more than a total of 90 days each | | | | repeated violations include cancellation of business |
| calendar year or 30 consecutive days within a | | | | licenses and seizure of assets. |