A temporary visitor (also known as non-PRC tax resident) is an individual who visits China for a period up to 90 days (or up to 183 days, if tax treaty applies), continuously or accumulatively, during a calendar year. Temporary visitors are eligible to be exempted from individual income tax (“IIT”) in China on the portion of their income paid by the overseas employer. If the income is borne by the mother company located overseas or paid by the Chinese subsidiary but charged back to the mother company, it will be subject to IIT in China. An individual can enjoy an extended period of 183 days of tax relief if a tax treaty exists between his or her home country and the mainland China. However, in order to claim eligibility for IIT exemption under double tax treaty for a prolonged period of 183 days instead of 90 days, the non-PRC tax resident should file a record with the in-charge tax bureau. Rules for calculating duration of stay of temporary visitors in China:
- In order to count “number of days stayed in China”, both the days of entry into and exit from China are counted as days spent in the mainland China. If the visitor enters and departs the mainland China on the same day, it is counted as one day.
- In order to calculate the tax liability on time apportionment basis, the count of “actual working days” is used. The day of entry into China and the day of departure from China will be counted as half-day each. Also, entry and exit on the same day is counted as half-day. For temporary visitors from nearby regions, such as Hong Kong or Macau crossing the border more than once in a day, the time spent in the mainland China will be counted as half-day.
- An individual’s duration of stay in China is calculated based on entry and exit documents, such as passport. For individuals from Hong Kong and Macau, valid evidence includes a passport/ home visit certificate and for individuals from Taiwan, a mainland visit permit is viewed as a document of evidence.
- A “tax year” starts on January 1 and ends on December 31.
WHEN IS TEMPORARY VISITOR NOT ELIGIBLE FOR TAX RELIEF
- Foreign companies with establishment in China: Temporary visitors working for foreign companies with establishment in China will not be entitled to 90-day (or 183 day) exemption rule. Since their cost of employment is deemed to be borne by the Chinese subsidiary, they will be subject to individual income tax immaterial of how much time they spend in China.
- Foreign investment enterprise: An expatriate holding a position in a foreign investment enterprise (FIE) in China for a period not exceeding 90 days (or 183 days in case of tax treaty) will be entitled to the tax exemption for overseas income. However, there are certain local tax authorities in China which do not view such type temporary expats as temporary visitors, and thus, consider them liable to pay IIT on foreign-sourced income.
- Representative offices: A chief representative or registered representative working for a representative office in China is not eligible for tax relief as the compensation cost is deemed to be borne by the representative office in China.
EXAMPLE: Two scenarios Mr. A, who is a French citizen, works for a company “X” in France. In 2013, Mr. A travels frequently to the mainland China to work for the Chinese subsidiary of the Company XYZ.
| SCENARIO 1 | SCENARIO 2 | |
| Duration of stay in China (treaty protection applies) | < 183 days | < 183 days |
| Schedule of visit in 2013 | ||
| Date of arrival | 10-Dec | 10-Dec |
| Date of departure | 30-Dec | 30-Dec |
| Number of days stayed in China | 21 days | 21 days |
| “Actual working days” stayed in China | 20 days | 20 days |
| Salary paid by “X”company, France | RMB 60,000 | RMB 40,000 |
| Salary paid by Chinese subsidiary | N/A | RMB 20,000 |
| PRC individual income tax liability | N/A | Yes, for the portion of salary paid in China |
See more about taxes in China : http://www.sjgrand.cn/tax-and-accountancy