Meaning
A regulatory document issued by the State Taxation Administration that governs the tax liabilities of non-resident individuals who receive income from working within the Chinese territory. This administrative directive provides detailed guidelines for determining the tax residency, taxable income, and tax calculations for expatriate employees under sta bulletin 35. By establishing clear thresholds based on the number of days spent in China, this regulatory instrument standardizes the administrative practice across different regional tax bureaus.
Residency Threshold
The administrative directive utilizes specific day-count rules to determine the tax liability of foreign individuals. An expatriate who resides in China for less than ninety days in a tax year is exempt from tax on income paid by an overseas employer for services rendered in China. Once this threshold is exceeded, the individual becomes subject to individual income tax on all income derived from Chinese sources, regardless of where the payment is made.
Executive Regulation
Senior executives, such as directors and general managers, face stricter rules than ordinary employees. The directive states that any income received by a senior executive for services performed in China is subject to tax, even if the individual spends less than ninety days in the country. This rule prevents high-level managers from avoiding tax through frequent short-term business trips.
Employer Responsibility
Domestic employers must act as withholding agents and are responsible for tracking the physical presence of their foreign staff. They must report the working days and calculate the monthly individual income tax using the graduated tax rates specified by the law.
