In recent years, the issue of the individual income tax (IIT) treatment of foreign nationals serving in a management capacity in global or Asia regional headquarters in China, and disputes over the levy of IIT, have become salient.
Principal regulations
China’s Implementing Regulations for the IIT Law specify that the income derived by foreign nationals from the provision of service in China due to serving in a position, employment, performance of a contract, etc. is considered income sourced in China, regardless of whether the place of payment is in China or not, and IIT needs to be filed and paid in China.
There are also bilateral agreements on the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income between the Chinese and foreign governments. Taking China and the US as an example, articles 1, 2 and 14 of the Agreement Between the Government of the People’s Republic of China and the Government of the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income are relevant.
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Quan Zhaohui is the executive partner at ETR Law Firm. He can be contacted on +8620 37181230, or by email at qzh@etrlawfirm.com
