Chinese Income Tax

Individuals who have a "place of abode" in China are subject to individual income tax on their worldwide income. "Place of abode" means maintaining a place of residence in China because of their legal residence status, family or economic ties.

Individuals not having a “place of abode” in China are taxed in accordance with their length of residency. Foreign expatriates are liable to tax based on their Chinese source income if resident for less than one year. Foreign expatriates who are resident for more than one year and less than five years are subject to tax on both their Chinese source income and foreign source income. However upon approval following the required application the foreign source income may be limited to only that income received from Chinese enterprises, establishments, organisations and individuals. Foreign expatriates who are resident for more than five years are subject to tax from the sixth year onwards on their worldwide income.

There is a special exemption for foreign expatriates who travel to China and earn income from an overseas employer with no permanent establishment in China. They shall be exempt from Chinese tax if they do not reside in China consecutively or cumulatively for more than 90 days in a calendar year. This 90 day test can be extended to 183 days if the individual is a tax resident of a country that has concluded a tax treaty/arrangement with China.

Salaries or wages that are taxable include basic salary, Foreign Service premium, bonuses, cost of living allowance, housing allowance in excess of actual rent, insurance and pension contributions, stock benefits, other cash benefits and any other benefits that are used to liquidate personal liabilities.

The rates of income tax are progressive, ranging from 5% to 45%. The 45% rate applies to income in excess of CNY 100,000 (approximately GBP 6,500) per annum.

Individuals are required to make monthly tax returns to the Chinese authorities and to make tax payments within seven days after the month end.