China Expat Tax Filing and Declarations for 2012 Income

Individual income tax finalization for foreigners in China

Jan. 14 – Individual income tax (IIT) is normally withheld from wages or salaries by employers and paid to the tax authorities on a monthly basis (within 15 days of the end of each month).

By Eunice Ku
An annual IIT declaration should be submitted to tax authorities within three months of the end of the previous calendar year (i.e., between January 1, 2013 and March 31, 2013 for the 2012 calendar year) for taxpayers who are subject to IIT in China and meet at least one of the following five conditions:
Have an annual income of more than RMB120,000
Derive income from two or more places inside the PRC
Derive income from sources outside the PRC
Received taxable income for which there is no withholding agent
Other conditions regulated by the State Council
IIT Liability Determination
Whether a taxpayer is subject to IIT in China depends on income source and time period spent in China.
Income Source
China-sourced income refers to income paid by your employer (both domestic and foreign) during the period you provide services under your employment in China. Non-China sourced income refers to income received when you work outside the territory of China.
Time Period Spent in China
If you reside in China for less than 90 days (or 183 days for residents of countries that have signed a double taxation agreement with China) continuously or cumulatively during a calendar year, your only taxable income is the China-sourced income you receive from your Chinese employer. If you reside in China for more than 90 days (183 days) but less than one year, all of your China-sourced income would be subject to IIT, but you do not have to pay IIT on income derived from outside of China.
Residing in China for one calendar year means that, in a calendar year, temporary absences from China are less than 30 days continuously or 90 days altogether. Individuals who reside in China for more than one year, but less than five years, are subject to IIT on all China-sourced income as well as foreign-sourced income borne by a China-based entity. Foreign individuals who reside in China for more than five years are taxed on their worldwide income.
 
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