Frequently Asked Questions
Here is a brief introduction on some of the most common questions we receive about payroll in China related topics. Please do not excitated to contact us for more details.
What kind of foreign individuals shall pay Individual Income Tax (IIT) in China?
(1) Foreigners and residents of the regions of Hong Kong, Macau and Taiwan (hereinafter referred to as “Foreign Individuals”) who derive income from work or employment with enterprises or organisations within the territory of China.
(2) Foreign individuals who derive income from personal services provided (including design work, shows, performances, advisory positions, brokerage services, agency services, etc.).
(3) Foreign individuals who derive income from author’s remuneration, royalties, interest, dividends, bonuses, the lease of property, transfer of property, contingent income and income from other sources inside China.
How does a foreign individual perform tax registration?
Foreign taxpayers must apply for tax registration within 15 days of the date that the taxpayer is employed and his or her contract becomes valid.
The following procedures for registration apply and the following documents are required:
1. Copy of one’s passport;
2. Copy of the Employment Contract;
3. Copy of the working permit.
How to determine the income source for incomes other than wages and salaries derived by foreign individuals?
The following types of income shall be considered as PRC-based income regardless of whether the payment is made inside or outside of China.
(1) Income from the lease of property to a lessee for use inside China.
(2) Income from the assignment of property such as buildings, land use rights, etc. inside China or the assignment of any other property inside the People’s Republic of China.
(3) Income from any kind of licensing rights for use inside China.
(4) Income from interest, dividends and extra dividends derived from companies, enterprises and other economic organizations or individuals inside China.
How to calculate individual income tax for foreign currency income earned by foreign individuals?
Foreign individuals shall file tax returns with and pay individual income tax to the tax authorities in RMB.
Income in foreign currency shall be converted into RMB according to the exchange rate published by the People’s Bank of China on the last day of the previous month before the tax payment receipt is issued.
Would the wages and salaries paid by enterprises or individuals outside China be regarded as income derived inside China?
For the wages and salaries derived by the foreign individuals, the place where he/she works is considered the source of income. The location of payment is not relevant in determining the income source.
In other words, wages and salaries derived by the foreign individual for work while inside China will be considered as China-based income, regardless of whether they are paid by enterprises or individuals inside or outside China. Wages and salaries derived by the foreign individual for work while outside China will be considered as income based outside China, regardless of whether they are paid by enterprises or individuals inside or outside China.
Which types of income derived by foreign individuals can be exempt from IIT?
At present, the following types of income by foreign individuals can be exempt from IIT:
(1) Foreign individuals are exempted from individual income tax for their income from interest, dividends and bonuses from enterprises with foreign investments in China.
(2) Foreign individual B or H shareholders are exempted from individual income tax on their dividends and bonuses from the share issuing enterprises in China.
(3) Foreign individuals obtaining a housing allowance, meal allowance, relocation and laundry expenses not in the form of cash or on an actual reimbursement basis.
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