Russell Brown OBE, managing partner of LehmanBrown has been quoted in the recent article Foreigners facing challenges with the implementation and interpretation of filling and paying income taxes in China look for answers. The article has raise an important problem that facing with complicated tax policies and regulations on China’s tax residents, most of the expatriates may have difficulties in dealing with Individual Income Tax.

Russell Brown mentioned that expatriates who spend more than 90 days (or 183 days for residents of countries that have signed a double taxation treaty with China), but less than five years in China during a calendar year, are subject to individual income tax (IIT) on their China-sourced income. A full year is classified as a year from January 1 to December 31 when an expat does not leave the country for more than 30 full days in one trip, or 90 full days in many trips.

“If an expat has continuously resided in China for more than five years, he or she would be subject to IIT on their worldwide income starting from their sixth year in China. The exception would be if the individual leaves the country for more than 30/90 full days, which would make the sixth year not a full year, and so on for each year of tax residence,” said Brown.

He said all foreigners who are taxed residents in China need to declare their income if it is sourced from China, even if they are paid outside of China. If they are employed and paid by a company in China, then this company would deduct the tax on their behalf and pay the taxes due. When an overseas company is paying the employee and no Chinese entity is involved, it is the responsibility of the employee to declare their income and pay the taxes due.

If you are interested in the article, please click the link to read more http://www.globaltimes.cn/content/1035671.shtml.

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