China: Expatriate Citizens to be Taxed on Global Income
Author: Phoebe Luo
Financial news agency Bloomberg has reported that China has launched an initiative to identify and locate Chinese citizens living outside of China and charge tax on their worldwide income, starting with those in Hong Kong, Macau and Singapore. China changed its rules on worldwide taxation in January 2019, bringing many more non-resident Chinese nationals into the tax scope.
In the draft regulations published in 2018, a change to the 'five-year rule' amended the definition of 'tax resident' which is currently dependent on the standard 183-day rule to determine residence. Foreign nationals' entitlement to tax exemption for their foreign-sourced income was to be limited to this five-year period. This new rule would make it much easier for a non-China-domiciled individual to be classed as tax resident. Now, in an effort to attract foreign skilled workers to the jurisdiction, this exemption period has been extended to six years.
Foreign taxpayers must comply with the filing requirement to get the exemption. It applies to all foreign-sourced income, unless the non-China-domiciled individual has stayed in China for 183 days or more a year in a six consecutive year period. The six-year clock is restarted if the individual is outside of China for more than 30 days in a single trip during the year. In practice, a foreign individual or an individual from Hong Kong, Macao or Taiwan is usually considered a non-China-domiciled individual.
In other news, we would like take this opportunity to congratulate the STEP Committee (Society of Trust & Estate Glass) for its establishment in China. General Manager, Phoebe LUO of Zetland Fiduciary Group in China is an honored to be a committee member.
Zetland Fiduciary Group provides professional corporate services, with a special focus on those entering the Chinese market or business expansion. We support customers' development requirements at different stages through the following services:
- China Market Entry Legal Consulting and Tax Planning；
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- Corporate Formation；
- Accounting and Tax Compliance Service.