Basis of assessment regarding the length of stay of persons without residence in China (mainland)

Among other things the basis of assessment regarding the length of stay of persons without residence in China, who spend time in China (occasionally), is clarified. Consequently the Chinese IIT should be paid for the income of this person, earned in China or abroad, if the following criteria are met:

• A person without residence in China has spent more than 183 days or more in China, every year, if the total number of days of residence in China during the first six years counts more than 183 days, and there is no single departure for more than 30 days in any year. The number of years of stay that are related to the six-year rule is determined from January 2019. All years, that a person has spent in China before 2019, will not be considered in the calculation.
• If this person has spent less than 183 days in China during the past six years, he or she will not have to pay the Chinese IIT for the income earned abroad and borne by a foreign branch or person.
• The same counts if the person has spent more than 30 days in a row outside China in one of the preceding six years, in which the person has spent 183 days or more in China. In this case the number of consecutive years will be recalculated.

Definition of a day of stay

The length of stay of a non-residential person in a tax year should be based on his or her total days of stay in China. A stay of 24 hours a day in China counts as one day of stay.

If a person spends less than 24 hours during one day in China, this day will not be counted as a day of stay.

Non-taxable persons, without residence in China

A non-taxable person without residence in China, that has spent less than 90 days outside China during a tax-year, should only have to pay the Chinese IIT on his or her wages and salaries income from China (that are borne by the Chinese company).

A non-taxable person without domicile in China, that has spent more than 90 days but less than 183 days in China during a tax-year should only be taxable for his or her wages and salaries income that was earned in China.

The most important aspects of the „six-year-rule“ summed up:

• According to the old regulations a foreign person, that has spent five years in a row in China, from the sixth year, had to pay taxes for his or her worldwide income in China. By means of the new IIT law, the five years are extended to six years. People, working in China, can now flexibly plan their time in China, without having to pay taxes for their income earned abroad.
• The six-year-rule implies that if a person leaves China for more than 30 day in a row during these six years, this time will be recalculated with the stay.
• Since January 2019, a person’s stay is counted as one year of stay in China, if this person has spent at least 183 days of a calendar year in China.
• If a person has spent less than 24 hours in China, this day will not be counted as a day of stay.
• The number of years of stay that are related to the six-year rule is determined from January 2019. All years, that a person has spent in China before 2019, will not be considered in the calculation.

*For members of the management in a Chinese company without taking into account the double taxation agreement. The situation according to the double taxation agreement (DTA) will be more complicated.