When a foreign employee is not a China domiciled individual and receives remuneration from a foreign employer whereby the payment is not borne by the company in China, the income tax payable will depend on the length of residence in China in a year as follows (varies by country):
• Not more than 90/183 days: exempt from paying income tax.
• More than 90/183 days but less than 5 years: Income tax is payable on China sourced income during the period during the period of residence in China.
• Over 5 years: Income tax is payable on worldwide income from the 6th year.
The above is a general rule, though there are in place bilateral tax treaties with some countries, providing an extra source of rules for interpreting the term “residence”.
When the employee is paid predominantly off-shore, the employee will need to declare the element that is associated with the work conducted in China on behalf of the company’s entity there.