When, How, and Why You Would Need to File Taxes in China
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Ok, you've done it. You've got the job, the visa, the bank account, the WeChat wallet. Now, what do you have to do to deal with all that hard-earned cash? It's tax time!
As a foreigner, do I need to pay taxes in China?
If you are a foreign citizen working full time (and legally) in China, then you should be paying taxes. However, China follows a standard withholding and reporting schedule for Individual Income Taxes, so it's pretty likely that you don't have to do anything at all in order to be compliant. Under this system, employers withhold taxes from their employees on a monthly basis, filing on their behalf. The deadline for annual tax reports in China is Mar 31. However, some individuals do need to file independently.
When would I need to file my own taxes?
You need to file your own tax report if you fit any of the following criteria:
You have more than one Chinese employer
You have earned income in China that was not already taxed by an employer
You have an annual income of RMB 120,000 or more
If you fall in any of these categories, you need to submit an Individual Income Tax form via the State Tax Administration.
How do I pay taxes?
You can pay your taxes one of three ways: via Alipay, WeChat, or your city's tax bureau website (Chinese language only).
Do I need to file taxes on income earned outside of China?
Foreign nationals do not need to file taxes on income earned from a non-Chinese source unless they have resided in China for over five years. For more about that, read via the QR code below.
What happens if I don't file taxes?
If you are required to file your own taxes, be wary of submitting your paperwork late. If you pay late, you're subject to a daily fine equal to 0.05 percent of your total required taxes. If you are egregious in your violation, you could be required to pay five times the total unpaid tax amount.
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How can I tell if my employer is filing taxes on my behalf?
Unfortunately, you have limited avenues to investigate if your company is filing on your behalf unless your employer maintains public book-keeping records. However, you can ask the finance department of your company for additional information to help you understand if your employer is aware and responsive to tax requirements. First, ask for an invoice when you're paid with information on tax and social security deductions. Second, follow up in advance of the Mar 31 deadline to request assistance and confirm that your taxes have been properly filed until that date.
Do I have to declare my Chinese income in my home country?
To answer this question, please review the relevant tax agencies in your home country. For Americans, the answer is yes. For American citizens, you must file taxes with the IRS regardless of if you are paying taxes in a foreign country. However, if you are considered a "bona fide resident" of a foreign country (working abroad year-round) or a "physical resident" of a foreign country (residing in a foreign country for 330 out of a 365 day period) you are eligible for the Foreign Earned Income Exclusion on any amount up to USD 103,900.
Most other countries around the world do not require you to pay taxes on any income earned if you are not considered a "tax resident." The standard for being considered a tax resident varies, but is often defined as six months of in-country residence. If you have any doubt about your obligations, check in with the latest laws in your home country, and remember, these can change over time.
Image: mecklaicpa.ca
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