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  3. Expatriate Employees and Global Taxation

Expatriate Employees and Global Taxation

Posted by Eric Lin on September 9, 2020

Eric Lin

As Chinese companies expand their businesses globally, expatriate employees’ individual income taxes become more critical for the employees themselves, and Chinese-owned foreign subsidiaries. Here, we’ll look at expatriate employees’ individual income taxes under the “Regulations for the Implementation of the Individual Income Tax Law of the People’s Republic of China” (Chinese IIT Rules).

In general, expatriate employees are hired by the Chinese parent company and work directly for the Chinese-owned foreign subsidiary. Expatriate employees are usually paid by the Chinese parent company or jointly paid by the Chinese parent company and the Chinese-owned foreign subsidiary. Employment with the Chinese-owned foreign subsidiary is usually from one to six years. The Chinese parent company typically pays for insurance, housing, or other similar benefits for expatriate employees.

Chinese IIT Rules

The Chinese IIT Rules state that Chinese individual income tax is imposed on any individuals who have a permanent residence within the territory of China. The State Administration of Taxation (SAT) defines the permanent residence as the relationship of household registration, family, and economic interest. This notice also clarifies that the permanent residence should apply to any individuals who temporally live abroad because of study, work and travel. Expatriate employees temporarily work in foreign countries and return to China by the end of foreign employment. Their household, families, and economic interests typically remain in China. Based on those facts, the expatriate employees are the individuals who have permanent residence within the territory of China.

The Chinese IIT Rules also define the taxable income as any income sourced within and outside of China. On January 17, 2020, the Department of Treasury and the SAT also clarified that taxpayers must include foreign wage income as part of their taxable income. The due date for the tax return is June 30 of the following year. The taxpayer should also consider the following items to file their tax return:

  1. Foreign tax credits
  2. Tax treaty benefits
  3. Documentation requirements

The foreign income regulations are becoming more complicated for expatriate employees. It is important to file Chinese income tax returns on time in order to maximize tax benefits. For additional information, click here to contact us. We look forward to speaking with you soon.

Our team is always ready to help.

Please contact us for more information.

Eric Lin

Manager, International Tax

Contact Eric   |   Read Eric's bio

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Expatriate Employees and Global Taxation

Posted by Eric Lin on September 9, 2020

Eric Lin

As Chinese companies expand their businesses globally, expatriate employees’ individual income taxes become more critical for the employees themselves, and Chinese-owned foreign subsidiaries. Here, we’ll look at expatriate employees’ individual income taxes under the “Regulations for the Implementation of the Individual Income Tax Law of the People’s Republic of China” (Chinese IIT Rules).

In general, expatriate employees are hired by the Chinese parent company and work directly for the Chinese-owned foreign subsidiary. Expatriate employees are usually paid by the Chinese parent company or jointly paid by the Chinese parent company and the Chinese-owned foreign subsidiary. Employment with the Chinese-owned foreign subsidiary is usually from one to six years. The Chinese parent company typically pays for insurance, housing, or other similar benefits for expatriate employees.

Chinese IIT Rules

The Chinese IIT Rules state that Chinese individual income tax is imposed on any individuals who have a permanent residence within the territory of China. The State Administration of Taxation (SAT) defines the permanent residence as the relationship of household registration, family, and economic interest. This notice also clarifies that the permanent residence should apply to any individuals who temporally live abroad because of study, work and travel. Expatriate employees temporarily work in foreign countries and return to China by the end of foreign employment. Their household, families, and economic interests typically remain in China. Based on those facts, the expatriate employees are the individuals who have permanent residence within the territory of China.

The Chinese IIT Rules also define the taxable income as any income sourced within and outside of China. On January 17, 2020, the Department of Treasury and the SAT also clarified that taxpayers must include foreign wage income as part of their taxable income. The due date for the tax return is June 30 of the following year. The taxpayer should also consider the following items to file their tax return:

  1. Foreign tax credits
  2. Tax treaty benefits
  3. Documentation requirements

The foreign income regulations are becoming more complicated for expatriate employees. It is important to file Chinese income tax returns on time in order to maximize tax benefits. For additional information, click here to contact us. We look forward to speaking with you soon.

Our team is always ready to help.

Please contact us for more information.

Eric Lin

Manager, International Tax

Contact Eric   |   Read Eric's bio

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The persistence of the COVID-19 pandemic has created challenging business conditions in Michigan and across the U.S. The second wave of infections has forced many state and local government agencies…

Read full story

PPP Loan Round 2 – Should You Apply?

A new round of PPP loans (PPP2) was ushered in with the passage of the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act) on December…

Read full story

Understanding Transactions, Even if Your Business Isn’t for Sale

Selling your small business may not have been your focus in 2020 and may not be your focus in 2021. With an economy in flux and public health at the…

Read full story

State and Local Tax Planning: What You Need to Know

In a world that is becoming more global, many companies have focused their resources on dealing with new international markets. While important, it is also imperative businesses do not take…

Read full story

Welcome 2021

Happy New year! At the end of most years, I ask myself – where did the year go? But not so this year. The end simply couldn’t come quick enough.…

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