Tax ID number?

[XiaoXi]

Does anyone in China that is doing a freelance job like teaching English or otherwise have a tax ID number? I'm from the UK and I work from home doing work that has no direct connection with China but one of the US clients I work with has asked for a foreign tax ID number otherwise they will have to withhold 30% of my earnings for tax purposes. I don't have a number obviously.

 

My question is - does anyone?

[imron]

Do you have a British National Insurance Number?  Use that.

 

I'm not in exactly the same boat (I'm Australian), but I have clients in the US and use my Australian Tax File Number with them.  You just need to fill out this form (see associated instructions).

 

Then just put your NIN on the line item foreign tax identifying number and you should be good to go.

 

Note the above form is for individuals only.  If you have incorporated a single person company (which it doesn't sound like you have), there is a separate form to use.

[XiaoXi]

Yes I do have that although that's not my UK Tax ID number. They do need that in the UK but they have a UTR. So whilst living in China you'd still give your home country tax ID even though not subject to tax in your home country?

 

Its a 1042 form they need filling in.

[889]

If you perform personal services outside the U.S. for a company in the U.S., then as a matter of law the U.S company is not required to withhold U.S. tax on payments to you for the services, provided you're not a U.S. citizen or resident alien.

 

But how does the U.S. company know you did everything outside the U.S.? How do they know you're not a U.S. citizen?

 

This article gives a good overview of the issue:

 

http://www.kahnlitwin.com/news/articles/Reporting-U.S.-Business-Payments-To-Foreign-Individuals-for-Services-Perfor

 

Point is, the U.S. company has to be cautious, since it's liable for the tax if it fails to withhold when it should have. If the U.S. company then withholds when it shouldn't, you can file a tax return with the IRS and get a refund.

[XiaoXi]

Yes so they need an ID number as proof.

[imron]

So whilst living in China you'd still give your home country tax ID

Well, like I said, my situation is a bit different from you.

 

I incorporated a company and do all my consulting and freelance work through that.  The company is based in Australia and is subject to tax there, and uses its Australian TFN.

 

What I know is that with US clients, if I don't want them to withhold tax, I fill out the W-8BEN-E form and that's that. I get the full amount for my invoices, and then process it as Australian income.

 

Is the amount you're going to be earning less than the tax free threshold in the UK?  If so, it's probably less hassle to just use your UK tax number rather than try to apply for a Chinese one.

 

even though not subject to tax in your home country?

So the question you need to ask is where are you subject to tax?

 

Possible choices are:

 

1) Get taxed in the US: Your US client will withhold your tax for you

2) Get taxed in China: Apply for a tax number, use that, and then be liable for some taxes on your earnings depending on the tax free threshold and any other China earnings you have.

3) Get taxed in the UK: Use your UK tax number, you may be liable for some taxes on your earning depending on the tax free threshold and any other UK earnings you have.

 

And while it's nice to pretend that maybe you've fallen between the cracks and shouldn't have to pay taxes on the income, as you're finding out, tax agencies have a way of reaching down in to those cracks and making you pay in some form (if not them, then their counterpart in another country).

 

There is also another choice:

 

4) Decide it's too much hassle and decline the work.

 

Out of all of those options, 3) sounds like the easiest and best to me.

[XiaoXi]

Is the amount you're going to be earning less than the tax free threshold in the UK?

 

Well I'm not subject to tax so they wouldn't charge it regardless of the threshold. That's how Amazon avoids any tax in the UK. I can't decline the work but I didn't know you could get a Chinese tax ID number in my kind of situation. My gf is Chinese and she runs a  接睫毛店 (don't really know how to translate that accurately to English) in a department store and she is not registered for tax. She said most people in China are not registered for tax like people working in markets/department stores or any kind of single person doing some kind of job that's not associated with a big company.

 

She said only big companies or people with a proper official job are registered for tax in China.

 

So I was basically wondering if anyone here actually had a China Tax ID number that didn't have any kind of larger company here or a proper job like a teacher at a university.

[imron]

Well I'm not subject to tax so they wouldn't charge it regardless of the threshold

Well, that should make the decision even easier then.

 

Here's an article I found about how China taxes foreigners and their incomes.  From the sounds of it though, it seems like you need some professional advice.

 

She said only big companies or people with a proper official job are registered for tax in China.

Any company that can issue official receipts is registered for tax in China.  It's far more than just big companies.  It may well be that the department store takes care of that for your gf's store.

[XiaoXi]

Here's an article I found about how China taxes foreigners and their incomes.  From the sounds of it though, it seems like you need some professional advice.

 

Ok I'll check that out.

 

Any company that can issue official receipts is registered for tax in China.  It's far more than just big companies.  It may well be that the department store takes care of that for your gf's store.

All she pays it the rent but that's to an individual landlord, not to the department store. All her actual earnings go to herself so there's certainly none going away as tax. People working in a market selling fruit and veg obviously wouldn't pay tax either. She said anyone in the department store that she knows isn't registered for tax either. If you're a doctor or a teacher at a university, run a big company, or even do something like a taxi driver, that's different but other than that most sole traders and the like wouldn't pay any tax. Also in the past my gf was working for a beauty parlour rather than being the owner like she is now and she was paid a set wage but neither the parlour or herself pay any tax. This is the norm it seems in China.

 

Its swings and roundabouts though because if you don't pay tax you certainly won't be qualifying for a pension or anything like that either.

[imron]

neither the parlour or herself pay any tax. This is the norm it seems in China.

It really depends.  Like I said, if they can issue official receipts, then somewhere along the line someone is paying tax.  I don't image many fruit sellers can do that.  I imagine quite a few beauty parlours do.

[XiaoXi]

It really depends.  Like I said, if they can issue official receipts, then somewhere along the line someone is paying tax.  I don't image many fruit sellers can do that.  I imagine quite a few beauty parlours do.

 

Yes so a restaurant for example would be, or a larger beauty parlour, like one with an official website or as part of a chain etc. That's more of what I'd call a slightly larger business. But a small place that does fingernail painting in a department store wouldn't require receipts. Market sellers too but not shops. Things like restaurants and shops aren't normally a sole trader though. Sole traders tend to not give receipts and wouldn't be liable to tax.

 

But still, even though for example a restaurant may be paying tax, the people working for a restaurant would be unlikely to - possibly because they don't earn above the threshold but even if they are slightly over they still wouldn't voluntarily. The problem is as you've probably realised living in China so long as that nobody rely tries to enforce anything in China. So no matter what you do unless its a blatant crime in broad daylight the police or whoever else are not likely to come and try to enforce anything. In general, individuals wouldn't go and register for tax and the Chinese officials wouldn't try to do anything about it either.

[Lu]

Some years ago customers could ask for receipts in restaurants that had a scratch code that (theoretically) you could win money with. Don't know if they still do that. It seemed like a good idea, similar to the receipt lottery in Taiwan.

[XiaoXi]

Some years ago customers could ask for receipts in restaurants that had a scratch code that (theoretically) you could win money with. Don't know if they still do that. It seemed like a good idea, similar to the receipt lottery in Taiwan.

 

Restaurants often offer a discount if you don't want a receipt. Many places try not to offer one unless you ask too. Even these places try to avoid tax but my point was more about individuals. I think if you were offering a discount to customers to avoid giving them a receipt at a big restaurant in the west not many minutes would pass before you were closed down/in jail/looking at a huge fine...