In order to help "going out" individuals better deal with the tax problems they may encounter abroad, the State Administration of Taxation has guided Dalian, Qingdao, Xiamen and other places to compile the "Guidelines for Individual Taxes and Fees for "Going Global" (hereinafter referred to as the Guidelines).
The guidelines are divided into 7 chapters, detailing 57 common tax matters for individuals who "go global" from 7 aspects: individual income tax policy, individual income tax calculation, individual income tax declaration, tax credit and concession, tax treaty, service initiative, and bilateral social security agreement. Guidance is provided in the form of policy basis, policy provisions, and situational Q&A. The policy is based on laws and regulations in effect as of the end of March 2024.
Today, we will share the principles for determining resident individuals, the tax liability of resident individuals, and the provisions related to overseas income in the general provisions of individual income tax policies.
1. Individual income tax policy
(1) General provisions
1. Principles for determining individual residents
【Policy basis】
Article 1 of the Individual Income Tax Law of the People's Republic of China, Article 2 of the Regulations for the Implementation of the Individual Income Tax Law of the People's Republic of China, and Article 1 of the Notice of the State Administration of Taxation on Printing and Distributing the Provisions >on Certain Issues Concerning the < Collection of Individual Income Tax (GSF [1994] No. 089).
【Policies and Regulations】
Individuals who have a domicile in China, or who do not have a domicile and have resided in China for a total of 183 days in a tax year, are resident individuals.
On the question of how to grasp "habitual residence": Article 2 of the regulations stipulates that an individual who has a domicile in China refers to an individual who habitually resides in China due to his household registration, family, and economic interests. The so-called habitual residence is a legal criterion for determining whether a taxpayer is a resident or a non-resident, and does not refer to the place of actual residence or residence in a specific period of time. If an individual residing outside China for study, work, family visits, tourism, etc., and must return to reside in China after the reasons are eliminated, China is the habitual residence of the taxpayer.
【Situational Q&A】
Q: I am a Chinese student studying for a master's degree at a university in the United States, and I have been studying in the United States for 2 years, am I a U.S. tax resident or a Chinese tax resident during my studies in the U.S.?
A: Since your household registration, family, and economic interests are still in China during your study in the United States, and you are only living in the United States for the purpose of studying abroad, you are still a Chinese tax resident. If the U.S. tax authorities determine that you are a U.S. tax resident under U.S. tax laws, i.e., you are a dual resident of China and the U.S., and you may further determine your residency under the U.S.-China tax treaty in accordance with the relevant provisions of the U.S.-China tax treaty.
The above methods are also applicable to the determination of the tax residency status of expatriate employees of Chinese enterprises.
2. Tax liability of individual residents
【Policy basis】
Article 1 of the Individual Income Tax Law of the People's Republic of China [Policy Provisions]
Individual income tax shall be paid in accordance with the provisions of the Individual Income Tax Law of the People's Republic of China on income derived from within and outside China.
【Situational Q&A】
Q: I have a household registration and family in China, do I need to declare and pay individual income tax to the Chinese tax authorities on the salary I received during the period when I was sent by the company to work in the Japanese branch?
Answer: If you habitually reside in China due to your household registration, family and economic interests, you constitute a Chinese tax resident individual, and the income obtained by a resident individual from within and outside China shall be declared and paid to the Chinese tax authorities in accordance with the provisions of the Individual Income Tax Law of the People's Republic of China. Therefore, the salary income earned during your employment in the Japanese branch is derived from sources outside China, and you should declare and pay individual income tax to the Chinese tax authorities.
3. Overseas income
【Policy basis】
Announcement of the Ministry of Finance and the State Administration of Taxation on Individual Income Tax Policies Related to Overseas Income (Cai
Announcement No. 3 of 2020 of the State Administration of Taxation of the Ministry of Administration).
【Policies and Regulations】
The following income is derived from sources outside China:
(1) Income obtained from the provision of labor services outside China, such as employment, employment, and performance of contracts;
(2) Income from author's remuneration paid and borne by enterprises and other organizations outside China;
(3) the income obtained from licensing various concessions for use outside China;
(4) Income related to production or business activities obtained from engaging in production or business activities outside China;
(5) Income from interest, dividends and bonuses obtained from enterprises, other organizations and non-resident individuals outside China;
(6) Income obtained from leasing the property to the lessee for use outside China;
(7) Income obtained from the transfer of immovable property outside China, the transfer of stocks, equities and other equity assets formed by investment in enterprises and other organizations outside China (hereinafter referred to as "equity assets"), or the transfer of other property outside China. However, if the transfer of equity assets formed by investment in enterprises or other organizations outside China is made, and at any time within three years (36 consecutive calendar months) before the transfer of the equity assets, more than 50% of the fair value of the assets of the invested enterprise or other organization is directly or indirectly derived from immovable property located in China, the income obtained shall be income derived from sources within China;
(8) Incidental gains paid and borne by enterprises, other organizations and non-resident individuals outside China;
(9) If the Ministry of Finance and the State Administration of Taxation have other provisions, they shall be implemented in accordance with the relevant provisions.
【Situational Q&A】
Q1: I am dispatched by a company in China to work in the U.S. branch, and during the period of working in the U.S. branch, will the company in China pay my salary and salary, is it domestic income or overseas income?
Answer: The wages you receive while working in the U.S. branch are the income obtained from providing labor services outside China, and belong to foreign income.
Question 2: If I publish an academic paper in an authoritative journal in Russia, is the remuneration I receive from within China or abroad?
A: Regardless of whether you complete the writing of academic papers in China or outside China, as long as the remuneration you receive is paid and borne by enterprises and other organizations outside China, it is earned abroad.
Q3: Is the royalty I receive from licensing the patented technology to others for use in Singapore, whether it is domestic or foreign?
Answer: The income obtained by an individual resident from licensing the concession to others outside China is the income obtained outside the territory.
Q4: If I invest in a business in Malaysia, will I receive dividends from the company onshore or offshore?
Answer: The interest, dividends and bonuses obtained by resident individuals from enterprises, other organizations outside China and non-resident individuals are overseas income.
Q5:Is the rent I receive from renting out my own house in Japan to others for use?
Answer: The income obtained by an individual resident from leasing the property to the lessee for use outside China is the income obtained by the resident as overseas income.
Q6: If I hold equity in a company in the Netherlands, if I transfer my equity to others, will the income from the equity transfer be domestic or overseas?
Answer: The income from the equity transfer obtained by an individual resident from the transfer of equity in an enterprise outside China is the income from the transfer of equity. However, if more than 50% of the fair value of the assets of the investee enterprise is directly or indirectly derived from immovable property located in China during any of the three years (36 consecutive calendar months) preceding the transfer of the equity, the income obtained shall be income derived from sources in China.
Q7:Is the winnings I get from gambling in Dubai domestically or overseas?
Answer: The incidental income paid and borne by enterprises, other organizations and non-resident individuals outside China obtained by a resident individual is overseas income.
Imprint Notice
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