China Income Tax & Social Security [Corrected 2019 Updated]
This article replaces the one we have published last week.
There were some mistakes to be corrected.
Sorry for the inconvenience.
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References to our prior articles:
Please refer to our previous article for some necessary details about the relatively new individual tax laws:
https://mp.weixin.qq.com/s/xESFqhyk7KFiqlr6TN0NaA
Please also refer to another prior article regarding the Chinese individual income tax rates and currency exchange:
http://mp.weixin.qq.com/s/XbnddcmCWIvWgdI2PrQ-3A
We have in yet another article provided more detail and updated information regarding the currency exchange and transfer part of the article:
https://mp.weixin.qq.com/s/ojqQA89sAVC3XQ5VML-tcA
Regarding the new tax law
As the year is coming to an end, many people are now thinking about taxes. In this article, we will provide people some necessary reminders with regards to the relatively new Chinese tax policies and update people regarding the individual income tax rates.
The main idea of the new tax policy as it relates to foreigners is that China will start to consider individuals residing for more than 183 days per year, a "Chinese Tax Resident" regardless of your visa status. There could be complications with other government departments for illegal employment if you do not hold a work permit and related visa, but this is another matter beyond the scope of this article.
According to the policy, much like in the former system, those that are outside Mainland China for at least six months interrupted or 30 days continuously excluding entry, and exit date can avoid worldwide taxes paid to China on their income and assets.
Many articles indicate either "six full years" or "six years"; however, the law is quite vague on this subject. Some people interpret it to mean five years that can overlap into a sixth, whereas others do not. We would suggest that readers air on the side of caution as the time has not come to see how the implementation will happen yet.
We can also confirm that as of January 2019, one's "clock" has reset, meaning that people can start from the beginning of their "6 years". Some accountants and legal experts are processing people with 2019 having reset while others are not. The law seems to also be a bit vague on this too.
Much like in the prior regulation, if one meets the required time for being out of China sooner, their "clock" will reset then. Once you become a Chinese tax resident it is mostly likely not possible to become a non-tax resident again. It may be possible if you have an unusually long absence from China, for example, that lasts for years and then re-apply to work in China from the beginning, much the same as a first time applicant.
Legal References
Regulations of the People's Republic of China on the implementation of the Individual Income Tax Law (specifically articles 4 and 5 are useful)
http://www.chinatax.gov.cn/n810341/n810755/c3960202/content.html
How to Calculate the Residence Time of Non-Residents in China?
http://www.chinatax.gov.cn/chinatax/n810356/n3255681/c5139720/content.html
Announcement Regarding the Criteria for Determining the Residence Time for Non-Residents
http://www.chinatax.gov.cn/n810341/n810755/c4148981/content.html
If a non-resident has cumulatively resided in China for a total of 183 days in a tax year (January through December) for the previous six years with no single departure for more than 30 days in a year, he or she needs to pay income tax in China on their worldwide income. [e.g., this person would then considered a China Tax Resident]
Personal Income Tax Deduction Update
We often get questions regarding people wanting to ensure that their employer has paid their income taxes. If you are concerned whether your employer in China has been paying taxes on your behalf, bring your contract and passport to the nearest tax office (税务局) where you work, and you can receive a statement-like document. In some cases, the contract is not necessary, but it is in other cases, so we suggest you bring it, just in case.
Please find below updated tables for individual income tax in China.
Income Tax for Residents
The income tax for residents is based on the annual taxable income and is calculated as follows:
Income Tax for Non-residents
The income tax for non-residents is based on the monthly taxable income and is calculated as follows:
Social Security Contributions effective from May 2019
Authors:
Are you looking for more useful tips for your life in China? Get in touch with contributors for a consultation and follow us in our WeChat Group to receive the latest news.
Julian (WeChat: julian_beijing) is based in Shanghai but often travels for work and runs a company that works with individuals and organizations doing business between the US, China, and Africa. He has been based in China for a number of years.
Ikky (WeChat: ikky888) is an R&D Manager working in Shanghai. He has been living in China for over 11 years.
Jatin (known by the nickname "Prince Jatin") (WeChat: jatinsoni) is a Multicloud DevOps Engineer working in Shanghai. He has been living in China for over eight years and owns three Indian community WeChat groups known for "Helping Indians" with their specific inquiries.
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