what taxes must foreigners pay?

Beijing wants to reform the tax system and remove certain advantages enjoyed by expatriates. Faced with pressure from foreign companies, the changes were postponed until 2024. Explanations of the South China Morning Post.

Beijing wants to change its tax rules for expatriates, but companies have managed to delay reforms until 2024 by threatening to leave China. In the first half of 2021, the Chinese authorities had already granted 380,000 residence permits to expatriates. the South China Morning Post therefore looked into the question to give explanations to foreigners who would like to settle in the country or who already work there.

Who pays taxes in China?

Persons domiciled in mainland China or who have resided there for at least 183 days in the last fiscal year are considered residents. These residents, as well as non-residents, are taxed only on income earned in Chinese territory.

You must have spent six consecutive years in the country, without a stay of more than thirty days outside the borders, to be taxed on all of your income.

Government-recognized “foreign experts”, including United Nations and affiliated personnel, as well as foreigners participating in bilateral cultural or educational exchange programs are not taxed at all in China.

In some municipalities in southern China, anxious to attract foreign talent, expatriates benefit from tax incentives.

What are we taxed on?

Income tax is done in stages. Expatriate workers are subject to the same thresholds as Chinese citizens and are taxable if they earn at least 5,000 yuan, or 692 euros, per month.

Expats are nevertheless entitled to certain deductions:

  • on their rent, up to 1,500 yuan per month (207 euros);
  • on their children’s school fees, up to 1,000 yuan per month (140 euros);
  • on continuing education costs, up to 400 yuan per month (55 euros).

These reductions should disappear in the years to come. “At the end of 2018, Beijing announced that these advantages would be doomed to disappear in 2022. But faced with pressure from foreign companies, the Ministry of Finance and the tax administration announced at the end of December an extension of these advantages for two additional years”, explains the Hong Kong daily.

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