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China Business Travelers: Watch out for New Residency Tax Law

For business travelers going to China, watch out for new residency rules.

Starting 2019, an individual with domicile in China or without domicile in China but stays in China for 183 days or more is considered a resident in China and shall pay individual income tax (IIT) for income derived in and out of China.
 
An individual without domicile in China or with domicile in China but stays in China for less than 183 days within a calendar year is a non-resident.  Only income derived in China is subject to IIT for non-residents.

 Under the old law, the test was one year instead of 183 days

Under the new law, more business visitors and expats on assignment may be residents taxed on worldwide income. Although you can claim a foreign tax credit, your overall tax will increase since China’s tax rate is higher than the U.S. rate.

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Richard Pon CPA, CFP