Principles for paying individual income tax

According to Individual Income Tax Law of the People’s Republic of China, the following principles shall be followed in deciding whether a foreigner needs to pay individual income tax in China:

(1) Individual income tax shall be paid by foreigners who are domiciled in the People's Republic of China on their income gained within or outside China and be calculated in separately;

(2) Individual income tax shall be paid by foreigners who are not domiciled in the People's Republic of China and have resided in China for more than one year on their income gained within or outside China and be calculated in separately;

(3) Individual income tax shall be paid by foreigners who are not domiciled in the People's Republic of China and have resided in China for less than one year on their income gained within China;

(4) Individual income tax shall be paid by foreigners who are not domiciled in the People's Republic of China and have not resided in China on their income gained within China.

Circumstances where individual income tax shall be paid on the income gained within China

In accordance with Individual Income Tax Law of the People’s Republic of China, individual income tax shall be paid by foreigners employed in China on the following categories of income:

(1) income from wages and salaries;

(2) income from remuneration for personal services;

(3) income from author’s remuneration;

(4) income from royalties;

(5) income from lease of property;

(6) income from transfer of property;

(7) contingent income;

(8) other income specified as taxable by the Ministry of Finance of the People's Republic of China.

Circumstances where the income shall be derived from sources inside the People's Republic of China

In accordance with Individual Income Tax Law of the People’s Republic of China, the following income, whether the place of payment is inside the People's Republic of China or not, shall be income derived from sources inside the People's Republic of China:

(1) Income from personal services provided inside the People's Republic of China because of the tenure of an office, employment, the performance of a contract, etc.;

(2) Income from interest, dividends and extra dividends derived from companies, enterprises and other economic organizations or individuals inside the People's Republic of China.

According to Chinese law, the taxpayer and his legal representative who denies tax shall settle all taxes payable or provide guarantees to the tax authority before an exit. For those taxpayers who do not pay taxes completely and do not provide guarantees, the taxation authority can notify the exit administrative authority to stop their exits.

The following personal income sources of foreigners are temporarily exempted from individual income tax:

1) Foreign individuals obtaining a housing subsidy, meal allowance, relocation and laundry expenses in the form of non-cash or on an actual reimbursement basis.

2) Foreign individuals obtaining a reasonable allowance for domestic and international business trips.

3) Foreign individuals obtaining a visiting fee, a language training fee or children’s educational expenses (any portion examined and approved by the local tax authority).

4) Foreign individuals obtaining dividends and bonuses from foreign-invested enterprises.