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Living in Shanghai
Ni hao and a warm welcome to our expat community in Shanghai! Get to know this city before you start your real life here. From accommodation to kids’ education, from banking and internet connection to where to shop and eat, see advice and information from iReloChina’s experts here.
China has a multi-level fiscal responsibility system regarding expats. Foreigners who are considered Chinese residents from a tax point of view must declare themselves of the place of their professional activity with the municipal tax offices when entering in China.
Required documents are the following:
• A passport and a valid visa
• A letter of employment
• The duly-completed application form for registration
The payment of tax must be done at the moment of the tax declaration, which happens every month.
The longer you stay in China, the more of your income is taxable. You will have to pay income tax in China based on the number of days you spend in Chinese territory. There are three time frames that trigger different tax rule. There is a rule concerning the 90 (or 183 day) rule, one year rule, and five year rule.
The 90 day rule applies if you spend less than 90 days in a fiscal year in China. If your country has signed a tax treaty with China, this goes up to 183 days. Under this rule, you only have to pay Individual Income Tax (IIT) on income earned by doing work paid for by a Chinese entity or individual. Income from an overseas employer is exempt during this period, even if the work is done in China. However, Senior Managers may still have to pay IIT, even if the work is performed outside of China.
If you stay more than 90/183 days, but less than one fiscal year, you have to pay IIT on all income earned for work done in China, regardless of whether it is paid by a Chinese or overseas entity. If you stay more than one year, but less than five years, all income received from Chinese or foreign employers for work done in China is taxable. Additionally, income earned from work done outside of China, but for a Chinese employer, is subject to IIT. Only income earned from a foreign entity for temporary work outside of China is exempt.
After five years of residence in China, all of your income, irrespective of its origins, becomes taxable in China. However, if you stay in another country for more than 30 consecutive days during this period, it can reset five year time frame. Please note that this rule says “more than” not “at least.” Also be aware that travel days in and out of China do not count as full days outside of China.
Taxes will be deducted by the company who reports your revenues and transferred directly to the Chinese tax administration. Your taxable income includes: basic salary, bonuses, commissions, compensation, and paid social security contribution. Calculation of taxes is based on the income bracket of the employee, minus a standard deduction of ¥5000 per month for foreigners who are living in China.
| Annual Taxable Income (RMB) | Tax rate |
| 36,000 or less | 3% |
| Between 36,000 and 144,000 | 10% |
| Between 144,000 and 300,000 | 20% |
| Between 300,000 and 420,000 | 25% |
| Between 420,000 and 660,000 | 30% |
| Between 660,000 and 960,000 | 35% |
| More than 960,000 | 45% |
You must file an income tax yearly. An annual return is also mandatory between March 1st and June 30th of each year. If you are employed by a company, your employer must file monthly tax withholdings and a year-end tax return. If you don’t have an employer, it is your legal obligation for file an individual return. You can go to the tax office, send it by App or by post.
Furthermore, the individual income tax is compulsory if:
• You receive income from 2 or more local employers.
• You receive income outside of China.
• You receive taxable income that is not withheld by an employer.
• There are special other cases which can be decided by the government.
New foreigners in China must ensure that they are in compliance. Otherwise, penalties may be imposed. New entrants should obtain the work visa, the resident permit and should register with the tax administration upon signature of the contract. Furthermore, before going back to their home countries, foreigners should make a final review of their income with the authorities. The type of visa and the length of stay are shared between immigration authorities and tax administration.
