China Unveils New Favorable Tax Rules for Foreigners
18 Mar 2019
Taxes have been a red-hot topic for foreigners living in China ever since stories began floating around of foreigners getting taxed on their overseas income. This weekend, some of the fog has been lifted after the release of two big pieces of tax-related news. Will it be enough to bring back those that the tax changes scared away?
China on March 16 announced specific rules concerning tax exemption to reduce the amount of individual income tax (IIT) paid on incomes earned overseas.
According to the rules jointly unveiled by the Ministry of Finance and State Taxation Administration (STA), individuals who have lived on the Chinese mainland for six consecutive years and have stayed there for 183 days or more each year will need to pay IIT on their overseas-sourced incomes. Otherwise, their incomes earned overseas will be IIT exempt.
The clock for the six-year period will be reset if the individual leaves the mainland for more than 30 consecutive days in a year, according to the rules.
The rules, coming into effect on Jan 1, 2019, also stipulated that a stay of less than 24 hours on the mainland will not be counted as a day, and the count started from Jan 1 this year.
The adjustment marked more generous tax exemptions on overseas-sourced incomes of foreigners and non-mainland citizens working in the mainland. The move will attract more foreign investment and overseas talent to work in the mainland, the STA said in a statement on its website.
Previously, the exemption was for tax residents who have lived on the mainland for less than five years.
On Saturday, China's Ministry of Finance also announced a favorable tax policy for overseas talent working in the Guangdong-Hong Kong-Macao Greater Bay Area.
Based on the individual income tax differentials between the Chinese mainland and Hong Kong, overseas high-end talent and professionals in short supply that work in the Greater Bay Area will get subsidies from Guangdong province and Shenzhen municipality to offset the differentials, according to the MOF.
The subsidies will be exempt from paying individual income tax.
The policy, effective from January 2019 to the end of 2023, applies to nine cities in Guangdong -- Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing, the ministry said.
It said the move aimed to encourage the development of the Guangdong-Hong Kong-Macao Greater Bay Area.
Consisting of the Hong Kong and Macao special administrative regions and the nine cities in Guangdong, the area covers 56,000 square km. It had a combined population of about 70 million at the end of 2017.
The State Taxation Administration released this handy infograph back in January to help understand some of the tax changes and exemptions that came into effect this year.
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