Whether foreigners need to pay taxes when working in China and the specific provisions for paying taxes depend mainly on their living conditions and income sources. According to the Chinese tax law, the tax liability of foreigners in China can be divided into resident individuals and non resident individuals:
1. Individual residents: Individuals who have a residence within China, or those who have no residence but have resided in China for a total of 183 days, are considered tax residents. Individual residents who obtain income from within and outside of China are required to pay personal income tax in accordance with the Chinese Personal Income Tax Law and relevant regulations.
2. Non resident individuals: Individuals who have no residence within China and do not reside there, or who have no residence and have resided in China for less than 183 days, are considered non resident individuals. Non resident individuals only pay personal income tax on their income sourced within China.
For foreigners who have lived in China for different periods, their tax obligations are as follows:
-If the cumulative residence in China does not exceed 90 days and the income comes from within China, if it is paid by overseas employers and not borne by domestic institutions in China, it can be exempted from paying personal income tax.
-If a person has resided in China for a cumulative period of 183 days but has not lived continuously for six years, and after filing, their income derived from outside China and paid by overseas units or individuals may be exempt from paying personal income tax. If there are more than 30 days of departure in any year during which one has resided for 183 days, the consecutive years will be counted again.
-If residing continuously in China for six years or more, starting from the sixth year, individual income tax must be paid in accordance with the law on the income obtained from within and outside China.
In addition, some subsidies obtained by foreigners during their work in China, such as housing subsidies, food subsidies, laundry fees, relocation fees, travel subsidies, home visits, language training fees and child education subsidies, can be exempted from individual income tax under certain conditions. The tax exemption of these subsidies requires taxpayers to provide valid vouchers, which must be approved and confirmed by the tax authorities.
Foreigners working in China should participate in social insurance in accordance with the Interim Measures for Foreigners Employed in China to Participate in Social Insurance, including foreigners with work permits and residence certificates.
The tax issues related to foreigners working in China may change with the policy adjustment. It is recommended to regularly follow the latest announcements and guidelines issued by the Chinese tax authorities to obtain accurate tax guidance.
