How to files Chinese taxes for foreigners?

[xiyangyang]

Does anyone have any information about how foreigners living in Beijing but receiving income overseas should pay their taxes in China? Information about any companies that help foreigners prepare their returns would be particularly welcome.

[WestTexas]

skip it and hope nothing bad happens.

Honestly I don't know if I've met anyone here who actually files taxes, but it's not really something I go around asking people about either

[icebear]

If you were receiving your income in China (a local bank), I'd say be cautious and definitely look into filing. I have several friends that worked under such arrangements, saved money for several years, and when deciding to return to their home country and transfer the money home were asked to provide a certificate proving they had been paying taxes for all income deposited in the account. So, in some cases, they do keep track of those things.

As you receive your income in a foreign bank its unclear to me if you should be paying income taxes there or in the country where the deposits are being made (as, after all, that other country could similarly audit the inflows for that account at some point in the future!).

Sorry to not offer more than that, except that I think in a case like this you should try to stay in compliance; if making a moderate to substantial income the costs are too small (for most) and the potential risks (if unlikely) are too large to be willfully ignorant about.

One thing to keep in mind the next time you negotiate a contract is to negotiate your wage in after-tax terms - i.e. the company deducts/pays on your behalf and you receive the net. While not completely common (from my discussions), I do know of a few friends that have this and it saves them a lot of uncertainty, both concerning filing requirements as well as after tax income.

[xiyangyang]

Thanks, both of you, for these comments. WestTexas makes a good point - it's entirely possible that years could go by and no-one would take any notice of whether or not you'd pay taxes. My thinking is more like Icebear's though - I'm willing to do things properly now to make sure that I won't have any problems in the future. Figuring out how to do this is the tough thing - I don't even know where to get started!

[imron]

I would say it's more likely that you should be paying taxes in the country where you are receiving the payments. I would ask your company's HR or accounting department for advice. They should almost certainly know where you should be paying taxes, especially if you are not their first/only employee who has found themselves in such a situation.

[jbradfor]

In cases like this, typically you pay taxes both in the country in which you are physically working AND in the country you hold citizenship. While you should get some credit on each tax return for taxes paid in the other country, expect some amount of double taxation.

[i'm assuming in this case you are working in China for a non-Chinese company being paid in part into an account in your home country.]

In any case, talk to your HR is best. The people that I have known that have done this got their tax assistance from HR.

[icebear]

In cases like this, typically you pay taxes both in the country in which you are physically working AND in the country you hold citizenship.

Actually, US citizens are one of the few (only?) who are held to a citizenship-based system of income taxation; most other nationalities are taxed only based on location of residence (which makes more sense, given that you primarily will consume locally provided government services, if any). I'm aware of this because I previously worked abroad in several offices that were primarily staffed by expat Europeans who never ceased to harp on how expensive my 'freedom' was! (Sarcastically, that is... see below).

In reality typical American expatriates will not be responsible to pay income taxes to the IRS because of a 83,500 USD exemption on all income earned abroad for American citizens if they are resident in a foreign country a majority of that tax year (spend less that 30 days total in the US, I believe); this is irregardless of what tax rate you were subject to in your country of residence, so long as you were liable to their income taxation rules. In effect this means only the very high income expats would be liable for double taxation, but even beyond this threshold there are exemptions for taxes already paid to local governments, so in the end its more of a compliance/paperwork issue - keeping in mind that those with incomes significantly higher than the above threshold are making their income in capital gains, most likely, not salaried income (capital gains are taxed once/if they are return to US 'soil', AFAIK, but I'm not sure).

One thing this brings up for the OP (if a US citizen) - even if you determine in the end you only are liable to pay taxes in Beijing, still plan on filing a income tax return on schedule (or within the 6 month extension expatriates are granted) as it will be easier now than going back and filing old returns when/if you start making income in the US again (at which point your gap in tax reporting could be scrutinized).

[WestTexas]

actually the cap for Americans is up to 92k now

[jbradfor]

FWIW, everyone I knew that went to China on assignment made a lot more than 92k, especially when the taxable portion of benefits were included.

[icebear]

FWIW, everyone I knew that went to China on assignment made a lot more than 92k, especially when the taxable portion of benefits were included.

Then we mingle in different circles. Big assumption, but I'm guessing the vast majority of readers on this board are probably in lower brackets.

Those in higher brackets most likely employ tax professionals, back home, who regularly file taxes for them and would probably be better off asking them directly.

[WestTexas]

Must be good to have that kind of money. Many foreign teachers here don't make 92k yuan per year, much less 92k dollars

[xiyangyang]

Thanks to everyone who responded to my question for their suggestions. Just to clarify my own situation, I'm a European, and am the first person to be sent overseas by my employer, so my HR department actually has no idea of how to deal with the tax situation here - I have to figure it out myself. My home country doesn't tax its citizens when they are resident elsewhere.

Based on my reading online, the Chinese authorities do expect foreigners working here for more than half the year to pay income tax in China. There is unfortunately very little information available about how one actually does this. It would be great if there were an equivalent of H&R Block in Beijing that deals with foreigners.

Again, any pointers would be very much appreciated. The question is not so much whether to pay taxes, as how to pay taxes.

[roddy]

There have got to be companies doing this - have a flick through the pages of one of the expat mags, or do a Google search for 'overseas taxes China' or something.

[icebear]

Agreed with Roddy - you are probably better served on a forum more specifically populated by expats living in China - TheBeijinger, AsiaExpat, etc.

[WestTexas]

I think in general if you are working for a Chinese company they will handle the Chinese income tax for you.

[roddy]

Am I right in saying that the rules changed late last year? I seem to recall they didn't worry about overseas income until you'd been in China for five years (and you could reset the clock by spending a mere three months overseas), but it's now after a year of residence? If its a recent change, the local tax bureaus probably don't know quite what they're meant to be doing either and are waiting for guidelines to come down.

By way of a half-relevant anecdote, a friend of mine doing freelance work (for local clients) in Beijing went to the tax office a few years back to ask how she should pay her taxes. "We don't know," was the answer. She didn't pay any taxes.

Or check chamber of commerce and embassy sites, places like that.

[jbradfor]

Then we mingle in different circles. Big assumption, but I'm guessing the vast majority of readers on this board are probably in lower brackets.

Note the operative phrase "on assignment". Given that the OP said "living in Beijing but receiving income overseas", I assumed that the OP is in Beijing on assignment from their home country, based on the fast that (at least part of) the income is not being paid in China. This might be a wrong assumption in this case, but my point here is that people that are send on assignment typically have fairly specialized skills and/or are very experienced, and hence likely make over 92k in their home country. And then add in the fact that, especially in the past, being sent to China was considered a hardship assignment, and so people sent would get a hardship bonus, housing allowance (typically taxable), etc.

I too know plenty of people working in China that make well under 92k a year. But none of them are on assignment, and all of them (AFAIK) are paid entirely in RMB.

Am I right in saying that the rules changed late last year? I seem to recall they didn't worry about overseas income until you'd been in China for five years

Rules might have changed, but all I know is that people I know that were in China on assignment several years ago had to file / pay taxes both here and in China. As icebear correctly pointed out, rules might be different for citizens of other countries. [i was under the assumption that the only-where-you-make-the-money rule only applied within the EU, that is if you were an EU citizen and worked in the EU. I wasn't aware it also applied to EU citizens working outside the EU.]