Chinese tax authorities’ are mounting a campaign against tax evasion. This means it is more likely that expatriate employees in China will be faced with an unpaid tax bill as well as an additional late payment fine of 0.05 percent per day of the overdue amount.
If the tax authority finds out about the late payment, it will provide a time limit to the individual or FIE on the individual’s behalf, to declare his / her tax situation and settle the outstanding tax. If they miss the deadline, a fine in the region of RMB 2,000 to RMB 10,000 may also be imposed.
If the expatriate employee approaches the tax authorities first before they find out about his problem, they may be able to avoid, or at least minimise, the fine as China’s officials have a tradition of extending leniency to individuals who admit their wrongdoings and turn themselves in. It is important that an expatriate employee avoids giving the impression that he or she is engaged in a conscious effort to evade paying taxes under the Supplementary Individual Income Tax Rules of the Standing Committee of the National People’s Congress on Punishment for Tax Evasion and Refusal to Pay Tax. Tax evasion is punishable by prison sentences of up to seven years and fines of up to five times the amount of tax evaded.