The distinction between non-resident individuals and non-domiciled personal income tax calculation methods mainly involves three "days": the number of days of residence, the length of stay in the country, and the number of working days. Below we have sorted out a few questions that have a relatively high degree of consultation to help everyone understand.
1. My company newly recruited a foreign employee, how should the company withhold and pay taxes when paying wages and salaries to him? If the employee meets the personal requirements of the resident in the future, will the calculation method be changed?
Answer: According to the "Individual Income Tax Law of the People's Republic of China", an individual who has a domicile in China or has no domicile but has lived in China for a total of 183 days in a tax year is a resident individual. Resident individuals shall pay individual income tax in accordance with the provisions of this law on income obtained within and outside China. Individuals who do not have a domicile and do not live in China, or who do not have a domicile but have lived in China for less than 183 days in a tax year are non-resident individuals. Non-resident individuals shall pay personal income tax in accordance with the provisions of this Law on income obtained from the territory of China. According to the "Implementation Regulations of the Individual Income Tax Law of the People's Republic of China" (Guo Decree No. 707), the term "residence in China" in the Individual Income Tax Law refers to habitual residence in China due to household registration, family, and economic interests. According to the Announcement of the Ministry of Finance and the State Administration of Taxation on Individual Income Tax Policies for Non-resident Individuals and Individuals Without Domiciles (Announcement No. 35 of 2019 of the Ministry of Finance and Taxation Administration) and the Announcement of the State Administration of Taxation on Issuing the Administrative Measures for Individual Income Tax Withholding Declaration ( Trial Implementation)> (State Administration of Taxation Announcement No. 61 of 2018) stipulates that when a non-domiciled individual declares for the first time in a tax year, he should estimate the number of days of residence in the country within a tax year and the number of days specified in the tax treaty in accordance with the contractual provisions For the number of days staying in the country during the period, the tax shall be calculated and paid according to the estimated situation.
If the taxpayer is expected to be a non-resident taxpayer, when the withholding agent pays wages and salary income, he shall withhold and pay taxes on a monthly basis, and the taxable income shall be the balance of the monthly income after deducting the expenses of 5,000 yuan, applicable Personal income tax rate table 3 calculates the tax payable. If an individual without a domicile is pre-determined as a non-resident individual and meets the requirements of a resident individual due to the extension of the number of days of residence, the tax withholding method within a tax year remains unchanged. Those who leave the country in the same year and are not expected to enter the country within the year can choose to complete the final settlement before leaving the country.
2. Our company has hired a foreign engineer who has no domicile in China. He needs to travel back and forth between China and other countries due to work. How is his personal residence time in China calculated?
According to the "Announcement of the Ministry of Finance and the State Administration of Taxation on Judging Criteria for Residence Time of Individuals Without Domicile in China" (Announcement No. 34 of 2019 of the Ministry of Finance and the State Administration of Taxation):
If a non-domiciled individual has lived in China for a total of 183 days in a tax year, if the cumulative number of days of residence in China for the previous six years is 183 days and there is no single departure for more than 30 days in any year, the tax year is from China Domestic and overseas income shall be subject to personal income tax; if the cumulative number of days of residence in China in any of the previous six years is less than 183 days or a single departure exceeds 30 days, the tax year is derived from outside China and paid by an overseas entity or individual Income is exempt from personal income tax.
The previous six years mentioned in the preceding paragraph refer to the six consecutive years from the previous year to the previous six years of the tax year. The starting year of the previous six years shall be calculated from 2019 (inclusive) and subsequent years.
2. The accumulative number of days of residence in China within a tax year of a non-domiciled individual is calculated based on the accumulative number of days the individual has stayed in China. Those staying in China for more than 24 hours on the same day shall be counted as the days of residence in China, and those staying in China for less than 24 hours on the same day shall not be counted as the days of staying in China.
