Withholding Tax Mechanics for Outbound Software Royalty Transfers
Cross-border software royalty transfers from China face 10% EIT, 6% VAT, and surcharges cleared via tech registration and joint tax record-filing before bank wire.
Public Notice 2019 Number 35
Meaning
Tax regulations regarding the determination of tax residency and the calculation of individual income tax for non residents provide the framework for taxing foreign employees working in China. Known as public notice 2019 number 35, this document outlines how to count days spent in the country and how to apportion income earned both inside and outside the territory. It ensures that the tax liability of a foreign individual is proportional to their physical presence and their role within a Chinese entity.
Residency Rules
The number of days an individual resides in China determines their status as a resident or non resident for tax purposes. Under public notice 2019 number 35, the six year rule allows non residents to avoid paying tax on their global income if they spend less than the required amount of time in the country. This provides a significant incentive for foreign experts and managers to take short term assignments.
Income Attribution
Formulas are used to calculate the taxable portion of a salary based on the time spent performing duties within the country. Public notice 2019 number 35 distinguishes between income paid by a domestic employer and income paid by an overseas office. This distinction prevents the over taxation of employees who have regional responsibilities that take them outside of China.
Filing Obligations
Both the employer and the employee have responsibilities for accurately reporting the time spent abroad and the corresponding income levels. Compliance with public notice 2019 number 35 requires the maintenance of travel logs and employment contracts.