Individuals who have a 'domicile or place of abode' in China are those individuals who maintain residence in China because of their legal residency status, family, or economic ties and who habitually reside in China.
Chinese nationals, excluding residents of Hong Kong, Macau, and Taiwan, who are normally considered as non-China-domiciled individuals, are generally considered to have a domicile in China.
Foreign individuals and residents of Hong Kong, Macau, and Taiwan are taxed in accordance with their physical presence in China, as follows:
- Foreign individuals who reside in China for less than one year will be taxed only on their China-source income (see the Income determination section for more information on China-source income).
- Foreign individuals who reside in China for more than one year but not more than five consecutive 'full' years will be subject to tax on both their China-source income and their foreign-source income. However, as a concession, foreign-source income is taxed only to the extent of income paid and/or borne by a China entity.
- Foreign individuals who reside in China for more than five consecutive 'full' years will be subject to IIT on their worldwide income from the sixth consecutive 'full' year onward.
- Foreign individuals who travel in China and derive income from an overseas employer with no permanent establishment in China will be tax exempt if they do not physically stay in China cumulatively for more than 90 days in a calendar year. If the individual is a tax resident of a country/region that has concluded a tax treaty/arrangement with China, the 90-day threshold is extended to 183 days during a calendar year or any 12 consecutive months, depending on the applicable tax treaty/arrangement.
The following categories of income, regardless of whether the payments are made within China or not, are considered China-source income:
- Income derived from employment or contracted labour services performed within the territory of China.
- Income derived from the operation of businesses within the territory of China.
- Rental income in relation to property used within the territory of China.
- Income derived from the transfer of real property, land use rights, or other property within the territory of China.
- Income derived through the grant of various franchises to be used within the territory of China.
- Interest and dividend income paid by companies, enterprises, other economic organisations, or individuals within the territory of China.
- Prizes won in lotteries or competitions hosted in China.
- Author's remuneration derived from works published in China.