Russell Brown speaks at LehmanBrown Worldwide Tax Implications Seminar
We had a great turnout for LehmanBrown’s recent seminar at the Capital Club on Worldwide Tax Implications. Our Managing Parner Russell Brown spoke on all things tax giving the audience an in-depth overview of tax implications for expatriate residents here in China.
If you are an expat residing in China, here is a quick summary to help you understand China tax and the implications for you as a non-domicile.
If you are a resident in China, you should be aware of the following key points:
1) Are you counting your days in China and other countries, and do you know what is classified as a day for tax purposes.
2) Have you structured your employment package to take advantage of China’s beneficial tax allowances?
3) Do you have an overseas role or responsibility with your employer or a company, and are you structure your remuneration optimally between onshore and offshore, different jurisdictions and nature of remuneration.
4) Do you know the 5 year rule, is it included in your employment contract that the company will allow you to break it.
The political environment surrounding taxation has changed dramatically since the worldwide banking crisis – great efforts are being made to make tax avoidance socially and morally undesirable. This does not mean that planning is not necessary or acceptable and here are some areas that anybody with cross border affairs should take advice on:
1) Even in the current tax climate expats can often have very beneficial tax and social security arrangements available to them when working abroad, so long as they plan in advance and stick to the plan.
2) Tax residence is a local issue – different states have different rules and different tax years. Double Tax Treaties can prevent double taxation, but Treaty networks vary.
a. Do not assume that double taxation is not possible.
b. Do not assume that you cannot be tax resident in more than one country.
c. Do not assume that citizenship or a right of residence in one country will prevent tax in a second country.
d. You must count your days in every country, but days alone may not determine your tax residence.
3) The USA taxes on citizenship (which includes green card holders); Obtaining a US green card or passport makes you liable for US tax on your worldwide income, chargeable gains and assets (on death). FATCA is making it easy for the US to identify non-filers.
For example, the Mayor of London is a UK resident dual UK/US citizen and recently had to pay US tax on a transaction that was exempt from UK tax.
4) Countries take different views on taxing non-residents; some do not tax them, some tax only certain income (typically local source business, employment or rental income), some tax local property gains and some tax all local income and gains.
5) Beware of death duties and wealth taxes – non-residents are often taxable on local assets or, for example, in the US (citizens and green card holders) and UK (UK domiciled individuals) on worldwide assets.
6) There are a number of ‘investor visa’ programs available, particularly in Europe and the USA – ensure that you understand the tax implications of entering a program before committing. For example, the US program creates a US tax liability on worldwide income and gains and the UK program requires UK tax residence (albeit on a non-domiciled basis).
For advice on China tax and support with your tax filings, please contact us…