Individual Income Tax Planning for Expatriates in China, 6th Edition (includes FREE one year access of ONLINE version)

PART I — INDIVIDUAL INCOME TAX

Chapter 1 Overview......................................................................p 3

• The Individual Income Tax Law........................................¶1-001
• Historical background........................................................¶1-002
• Present legal framework....................................................¶1-003
• Further reforms proposed...................................................¶1-004

Chapter 2 Liability to Tax.............................................................p 7

• Basis of tax liability ..........................................................¶2-001
• Individuals domiciled in China..........................................¶2-002
• Expatriates living in China (one full year..........................¶2-003
• Expatriates living in China for more than 90 days
• but less than one year...................................................¶2-004
• Temporary visitors (90 days or less...................................¶2-005
• Expatriate directors and senior managers .........................¶2-006
• Calculating length of stay in China....................................¶2-007

Chapter 3 Taxable Income and Deductions .............................p 21

• Taxable income..................................................................¶3-001
• China-sourced income ......................................................¶3-002
• Employment income (wages and salaries).........................¶3-003
• Stock options.....................................................................¶3-004
• Insurance and social security benefits for expatriates........¶3-005
• Production and business income........................................¶3-006
• Contracting or leasing operations income.........................¶3-007
• Personal service income.....................................................¶3-008
• Partnership and sole-proprietorship income .....................¶3-009
• Remuneration for manuscripts and artistic works.............¶3-010
• Royalty income .................................................................¶3-011
• Interest income, equity dividends and principal share dividends ............................................................¶3-012
• Property leasing income ....................................................¶3-013
• Assignment of property income ........................................¶3-014
• Contingency income..........................................................¶3-015
• Other unclassified income .................................................¶3-016
• Deduction for donations ....................................................¶3-017

Chapter 4 Exemptions and Reductions ....................................p 47

• Exemptions........................................................................¶4-001
• Housing fund contributions, medical insurance and pension contributions for local staff.............................¶4-002
• PRC Social Insurances for foreigners legally working in China .......................................................................¶4-003 
• Overseas Insurance and social security benefits provided to expatriates ................................................¶4-004
• Employment benefits received by foreigners.....................¶4-005
• Income derived by foreign experts working under development or exchange programmes........................¶4-006
• Dividend income received by foreigners...........................¶4-007
• Income derived from transfer of family living quarters ........................................................................¶4-008
• Income derived from share transfers ................................¶4-009
• Interest derived from saving in Chinese domestic banks............................................................................¶4-010
• Monetary awards ...............................................................¶4-011
• Withholding tax service fee...............................................¶4-012
• Reductions ........................................................................¶4-013

Chapter 5 Tax Calculation .........................................................p 55

• General rules......................................................................¶5-001
• Tax on wages and salaries .................................................¶5-002
• Calculation of tax where tax liability is borne by employer ......................................................................¶5-003
• Time apportionment of an expatriate’s wages...................¶5-004
• Calculation of tax on less than one month’s wages or daily wages ..................................................................¶5-005
• Calculation of tax on annual bonuses ...............................¶5-006
• Calculation of tax on stock options....................................¶5-007
• Taxation of Stock Appreciation Rights and Restricted Stock ............................................................................¶5-008
• Tax on production and business income ...........................¶5-009
• Tax on income from contracting or leasing operations.....................................................................¶5-010
• Tax on income from personal services .............................¶5-011
• Tax on remuneration for manuscripts ...............................¶5-012
• Tax on royalties and income from leasing property .........¶5-013
• Tax on income from assignment of property.....................¶5-014
• Tax on interest, dividends and other portfolio income .....¶5-015
• Tax on non-monetary assets...............................................¶5-016
• Tax credits..........................................................................¶5-017

Chapter 6 Tax Registration, Account Books and Vouchers ................................................................................p 87

• Tax registration .................................................................¶6-001
• Account books and vouchers ............................................¶6-002

Chapter 7 Tax Returns and Payment of Tax ............................p 91

• Deemed “withholding agents” ..........................................¶7-001
• Obligation to withhold tax ................................................¶7-002
• Withholding agents’ administrative obligations ...............¶7-003
• Self-reporting by taxpayers................................................¶7-004
• Tax returns required to be filed and samples of official invoice (“fapiao”)............................................¶7-005
• Practical guide to completing returns................................¶7-006
• How to lodge a return........................................................¶7-007
• Time limits for returns and tax payments .........................¶7-008
• Settlement of tax upon departure from China....................¶7-009
• Tax refund..........................................................................¶7-010
• Tax undercharged...............................................................¶7-011
• Tax certificate ....................................................................¶7-012

Chapter 8 Investigations, Disputes and Penalties ..................p 105

• Investigations ....................................................................¶8-001
• Dispute over payment of tax .............................................¶8-002
• Dispute over penalty or enforcement measures.................¶8-003
• Penalties generally.............................................................¶8-004
• Default by taxpayer in compliance matters ......................¶8-005
• Default by withholding agent in compliance matters........¶8-006
• Tax evasion........................................................................¶8-007
• Tax evasion penalties ........................................................¶8-008
• Punishment for tax officials ..............................................¶8-009
• Refusing to pay tax using violence or threats....................¶8-010
• Recovery of unpaid tax......................................................¶8-011

PART II — TAX TREATIES

Chapter 9 Tax Treaties ..............................................................p 115

• Overview ...........................................................................¶9-001
• Structure of tax treaties......................................................¶9-002
• China’s tax treaties ............................................................¶9-003

Chapter 10 General Application of Treaties............................p 119

• Persons eligible for treaty benefits ..................................¶10-001
• Taxes covered..................................................................¶10-002
• Territorial scope ..............................................................¶10-003
• Entry into force and termination .....................................¶10-004
• Treaty interpretation ........................................................¶10-005
• Non-discrimination..........................................................¶10-006
• Mutual agreement procedure and exchange of information ................................................................¶10-007

Chapter 11 Taxation of Individuals.........................................p 131

• Income from dependent personal services ......................¶11-001
• Income from independent personal services ...................¶11-002
• Directors’ fees .................................................................¶11-003
• Entertainers’ and athletes’ income ..................................¶11-004
• Pensions...........................................................................¶11-005
• Remuneration and pensions for Government service......¶11-006
• Business apprentices’ and trainees’ income ....................¶11-007
• Diplomatic agents’ and consular officers’ income ..........¶11-008
• Teachers’ and researchers’ income ..................................¶11-009
• Definition of “permanent establishment” .......................¶11-010
• Property income and capital gains ..................................¶11-011

Chapter 12 Dividends, Interest and Royalties........................p 153

• Payments to non-residents subject to
• withholding tax..........................................................¶12-001
• Dividends ........................................................................¶12-002
• Interest.............................................................................¶12-003
• Royalties .........................................................................¶12-004

Chapter 13 Elimination of Double Taxation ..........................p 161

• Methods of eliminating double taxation .........................¶13-001
• Tax credit method ...........................................................¶13-002
• Tax exemption method.....................................................¶13-003
• Elimination of double taxation of dividends, interest and royalties .................................................¶13-004
• Mainland China/Hong Kong double taxation arrangement ...............................................................¶13-005
• Mainland China /Macau double taxation arrangement................................................................¶13-006
• New development in double taxation arrangements with Hong Kong and Macau......................................¶13-007
• Mainland China / United States double tax treaty...........¶13-008
• Mainland China / Canada double tax treaty.....................¶13-009
• Mainland China / Japan double tax treaty.......................¶13-010
• Mainland China / Korea double tax treaty.......................¶13-011
• Mainland China / Singapore double tax treaty................¶13-012
• Mainland China / Australian double tax treaty................¶13-013
• Mainland China / New Zealand double tax treaty...........¶13-014
• Mainland China / United Kingdom double tax treaty......¶13-015
• Taiwan individuals working in Mainland China..............¶13-016

PART III — TAX PLANNING

Chapter 14 Tax Planning Overview.........................................p 195

• Structure of compensation package ................................¶14-001
• Relocation allowances.....................................................¶14-002
• Assignment allowances....................................................¶14-003
• Traditional expatriate package.........................................¶14-004
• Local plus allowances package (no tax equalisation) .....¶14-005

PART V — LEGISLATION

• Legislation in English
• Legislation in Chinese

APPENDICES

Deloitte enjoys a long history of serving clients with business interests in China. As China continues to adopt open-door policies and encourage international trade and investment, Deloitte will continue its commitment to assisting foreign companies doing business in China, and Chinese companies expanding domestically and globally with its multidisciplinary professional services in the areas of audit, tax, enterprise risk service, consulting and financial advisory.

Deloitte serves over 800 multinational corporations and Chinese enterprises and their affiliated companies in the Chinese Mainland as well as overseas. Deloitte also serves around one-third of all companies listed on the Stock Exchange of Hong Kong.

Deloitte was one of the first foreign accounting organisations to establish a presence in China by opening an office in Shanghai in 1917. Since the 1980s, Deloitte has increased its presence and is now one of the leading professional service providers in China.

The landmark integration of Deloitte China and Deloitte Taiwan, which took effect on 1 June 2012, creates the synergy to enable Deloitte to support our clients even better. Deloitte has a widespread network covering 26 cities in Greater China including Beijing, Hong Kong, Shanghai, Changsha, Taipei, Chengdu, Chongqing, Dalian, Guangzhou, Hangzhou, Harbin, Hsinchu, Hefei, Jinan, Kaohsiung, Macau, Nanjing, Shenyang, Shenzhen, Suzhou, Taichung, Tainan, Tianjin, Ulaanbaantar, Wuhan and Xiamen. In addition, over the next 3 years, Deloitte commits to invest USD160 million in China to further enhance the service capabilities in China. This strategic market plan further demonstrates our unwavering commitment to providing world class professional services for clients in China and beyond.

Deloitte’s experience in China is extensive and the firm continues to play a significant role in developing the accounting and tax professions in China by assisting the PRC Government in formulating tax policies and accounting standards.

With the establishment of Deloitte Tax Research Foundation since 2006, the firm is committed to promoting education, research and innovation in the field of taxation by supporting an array of national and local programs, including Deloitte Tax Championship as a key initiative for developing future tax talent in China. In 2011, Shanghai Deloitte Tax Ltd. was established as a certified tax firm by receiving a formal business license from the Chinese authority. It became the first firm in China to incorporate a dedicated tax entity using a Big Four brand and is allowed to undertake the regulated tax certification business.

Since the debut release of the CCH Hong Kong’s Tax Planning for Expatriates in China in 2003, Deloitte has been engaged as the Consultant Author. The publication is intended to outline the basics of PRC individual income tax regulations and practice as it applies to foreigners working in China. For the 2016 edition, Deloitte continues to deploy the most experienced tax professionals to update the publication. While every effort is made to ensure that the information contained in the book is up-to-date, readers are advised to seek professional advice when important tax related business transactions are being undertaken.