China Economic Review

Updated tax laws to hit the pockets of foreigners in China

Revisions to China’s personal income tax code will mean foreign workers will be subject to more tax payments within the same time horizon, Caixin reports, potentially reducing the attractiveness of China to overseas talent.

Foreigners residing in China for more than six months (183 days) in the calendar year will see their taxable income extended to their entire worldwide income, the law states, while those resident on the mainland for less than this will only pay tax on onshore income.

Under the current system, foreigners abide by the “five-year rule,” whereby overseas employees don’t start paying tax on offshore income until they have been resident in the country for five years.

“If the ‘five-year rule’ is canceled, many foreign experts may choose to leave,” a taxation specialist told Caixin.

The new rules, passed earlier this month, were first introduced at the end of June and will take effect next year.