Official tax regulations released in 2019 clarify the tax residency status and income tax calculation methods for non-resident individuals working for short periods within the People’s Republic of China. This state taxation administration bulletin 2019 no 35 provides a unified set of rules for determining the tax liability of foreign employees based on their physical presence and the source of their income. It governs the use of the 183 day rule for residency and the apportionment of income between Chinese and foreign sources.
The boundary of this regulation is the specific definition of what constitutes a day of presence and which types of income are subject to Chinese taxation. This bulletin ensures that both employers and employees have a clear understanding of their tax obligations. It replaced several older circulars to provide a more modern and consistent approach to international tax compliance.
The bulletin sets out the criteria for deciding whether a person is a resident or a non-resident for tax purposes during a specific calendar year. This state taxation administration bulletin 2019 no 35 explains that an individual is considered a resident if they spend 183 days or more in China during a year. A day of presence is counted if the person is physically in the country for at least twenty-four hours on that day.
If they arrive or depart on a given day, that day is not counted as a full day for the residency calculation. This is a significant change from the old rules which counted any part of a day as a full day. The determination of residency is the first step in deciding which income is taxable.
Residents are taxed on their worldwide income, while non-residents are only taxed on their income from Chinese sources. This distinction is the foundation of the entire personal income tax system for expatriates.
The regulation provides specific formulas for calculating the amount of tax owed by non-resident individuals. This state taxation administration bulletin 2019 no 35 introduces an apportionment method that takes into account the number of days the person worked in China and the amount of salary paid by the local entity. If a foreign employee is paid partly by a Chinese company and partly by a foreign parent, the tax bureau only taxes the portion related to the work performed in China.
The formula also allows for the exclusion of income for days spent working outside the country, even if the salary is paid by the Chinese entity. This ensures that the tax is proportionate to the actual economic activity occurring within the jurisdiction. The bulletin provides several examples of how to apply these formulas in different scenarios, such as when a person holds multiple roles in different countries.
This clarity reduces the risk of errors and disputes during the tax filing process.
The bulletin also details the reporting requirements and the documentation that must be kept by the employer. This state taxation administration bulletin 2019 no 35 requires companies to track the travel schedules of their foreign employees and to verify their residency status every year. The employer is responsible for withholding the correct amount of tax and for filing the monthly returns.
If the employee’s status changes during the year, the company must make the necessary adjustments to the tax payments. The tax bureau can audit these records at any time and may ask for copies of passports and employment contracts to verify the days of presence. Failure to comply with these rules can lead to fines for the company and legal issues for the employee.
The bulletin provides a clear roadmap for staying compliant in an increasingly complex international environment. This ensures that the tax system is fair and that the state’s revenue is protected.
Cross-border software grants require Technology Contract Registration to secure VAT exemptions before State Taxation Administration outbound tax recordals unlock bank remittance.
Expertise is a utility, not a secret. sentiention™ publishes its working knowledge as open reference: intelligence layer covering the materials it sources, the markets it enters, and the reference that serves both.