To implement the amended Individual Income Tax Law of the People’s Republic of China (hereinafter referred to as “Tax Law”) and the Implementation Regulations for Individual Income Tax Law of the People’s Republic of China (hereinafter referred to as “Implementation Regulations”), the following policies with respect to individual income tax for non-resident individuals and resident individuals without a domicile (hereinafter collectively referred to as “individuals without domicile”) are hereby announced:

I. Source of Income

1. Source of Income From Salaries and Wages

Income from wages and salaries attributable to work performed within the territory of China (hereinafter referred to as “within China”) shall be deemed income sourced within China. The period of work within China shall be calculated based on the number of days the individual worked within China, including actual working days within China, as well as days during the period of work within China in which the individual takes public holidays, personal leave, or attends training, whether within or outside China. For individuals holding concurrent positions with entities both within and outside China, or holding positions solely with entities outside China, if the stay within China on a given day is less than 24 hours, it shall be counted as half a day when calculating the number of working days within China.

For individuals without a domicile holding concurrent positions with entities within and outside China, or employed solely by entities outside China, who work both within and outside China during the same period, the income derived from wages and salaries within and outside China shall be calculated based on the proportion of working days within and outside China to the total calendar days in the period. Working days outside China shall be calculated as the total calendar days in the period minus the working days within China.

2. Source of Income From Multi-month Bonuses and Equity Incentives

For individuals without a domicile receiving multi-month bonuses or equity incentives whose source of income is determined in Item (1) of this Article, the portion of such multi-month bonuses or equity incentives that is received by individuals without a domicile while performing duties or executing responsibilities within China and attributable to the work period outside China shall be considered wages and salaries sourced outside China. For individuals without a domicile who cease performing duties or executing responsibilities within China and receive income from multi-month bonuses or equity incentives after leaving China, the portion attributable to the period of work within China shall be treated as wages and salaries sourced within China. The specific calculation method is: the multi-month bonus or equity incentive multiplied by the ratio of the number of working days within China during the relevant work period to the total number of calendar days in that work period.

Where an individual without a domicile receives multiple multi-month bonuses or equity incentives sourced within and outside China within one month that include income attributable to different periods, the income attributable to different periods within China shall first be calculated separately in accordance with this Announcement, and then the total amount of multi-month bonuses or equity incentives sourced within China for that month shall be calculated.

For the purposes of this Announcement, “multi-month bonuses” refer to wages and salaries such as bonuses, year-end salary increases, and dividends that are received in a single payment and attributable to multiple months, excluding monthly fixed bonuses or one-off payments of multiple months’ wages. “Equity incentives” include stock options, equity options, restricted stocks, stock appreciation rights, equity awards, and other discounts or subsidies received from employers for subscribing to stocks or other securities.

3. Source of Income From Remuneration of Directors, Supervisors, and Senior Management Personnel

For individuals serving as directors, supervisors, or senior management personnel (hereinafter collectively referred to as “senior management personnel”) of resident enterprises within China, regardless of whether they perform their duties within China, remuneration such as director fees, supervisor fees, wages and salaries, or other similar compensation (hereinafter collectively referred to as “senior executive remuneration”, including multi-month bonuses and equity incentives) paid or borne by resident enterprises within China shall be deemed income sourced within China.

For the purposes of this Announcement, “senior management personnel” includes general and deputy general managers, chief officers of various functions, directors, and other similar corporate management roles.

4. Source of Income From Author’s Remuneration

Author’s remuneration paid or borne by enterprises, public institutions, or other organizations within China shall be deemed income sourced within China.

II. Calculation of the Amount of Income From Salaries and Wages for Individuals Without a Domicile

For individuals without a domicile receiving salaries and wages, the amount of income from salaries and wages subject to tax within China (hereinafter referred to as the “salary and wage income amount”) shall be calculated as follows:

1. Where the individual without a domicile is a non-resident individual

For non-resident individuals receiving wages and salaries, except as provided in Item 3 of this Article, the monthly wage and salary income amount shall be calculated separately under the following two circumstances:

(1) Where a non-resident individual’s cumulative residence in China does not exceed 90 days.

For a non-resident individual whose cumulative residence in China within a tax year does not exceed 90 days, individual income tax shall be calculated and paid solely on the salaries and wages attributable to periods of work performed within China and paid or borne by an employer within China. The formula for calculating the monthly salary and wage income amount is as follows (Formula 1):

Monthly Salary and Wage Income Amount = Total Monthly Salary and Wage Income Within and Outside China × (Monthly Salary and Wage Amount Paid Within China / Total Monthly Salary and Wage Income Within and Outside China) × (Number of Working Days Within China During the Period to Which the Monthly Salary and Wage Pertains / Total Number of Calendar Days in the Period to Which the Monthly Salary and Wage Pertains)

For the purposes of this Announcement, “employer within China” includes entities and individuals within China that employ staff, as well as institutions or premises within China of entities or individuals outside China. Where an employer within China adopts a fixed-rate income tax assessment or has no business income and thus is not subject to income tax, the salary and wage income earned by an individual without a domicile working for such employer shall be deemed paid or borne by that employer within China, regardless of whether it is recorded in the employer’s accounting books. For the purposes of this Announcement, the calendar days of the work period to which salaries and wages belong refer to the number of days calculated on a calendar basis during the work period to which the salaries and wages received by an individual without a domicile belong.

Where the monthly salaries and wages within and outside China listed in the formula in this Announcement include multiple payments of salaries and wages belonging to different periods, the salary and wage income amount belonging to different periods shall first be calculated separately in accordance with the provisions of this Announcement, and then the monthly salary and wage income amount shall be calculated by adding them up.

(2) Where a non-resident individual’s cumulative residence within China exceeds 90 days but is less than 183 days.

For a non-resident individual whose cumulative residence in China within a tax year exceeds 90 days but is less than 183 days, individual income tax shall be calculated and paid on salaries and wages attributable to work periods within China. Salaries and wages attributable to work periods outside China shall not be subject to individual income tax. The formula for calculating monthly salary and wage income amount is as follows (Formula 2):

Monthly Salary and Wage Income Amount = Total Monthly Salary and Wage Income Within and Outside China × (Number of Working Days Within China During the Period to Which the Monthly Salary and Wage Pertains / Number of Calendar Days in the Period to Which the Monthly Salary and Wage Pertains)

2. Where the individual without a domicile is a resident individual

For a resident individual without a domicile who has cumulatively resided in China for 183 days or more within a tax year and receives income from salaries and wages, the monthly salary and wage income amount shall be calculated in accordance with the following provisions:

(1) Where a resident individual without a domicile has resided in China for an aggregate of 183 days or more within a year for less than six consecutive years.

A resident individual without a domicile who has resided in China for an aggregate of 183 days or more within a year for less than six consecutive years, and who meets the preferential conditions specified in Article 4 of Implementation Regulations, shall be subject to individual income tax on all salaries and wages earned, except for those attributable to work performed outside China and paid by entities or individuals outside China. The formula for calculating monthly salary and wage income amount is as follows (Formula 3):

Monthly Salary and Wage Income Amount = Total Monthly Salary and Wage Income Within and Outside China × (1 - Monthly Salary and Wage Amount Paid Outside China / Total Monthly Salary and Wage Income Within and Outside China × Number of Working Days Outside China During the Period to Which the Monthly Salary and Wage Pertains / Number of Calendar Days in the Period to Which the Monthly Salary and Wage Pertains)

(2) Where a resident individual without a domicile has resided in China for an aggregate of 183 days or more within a year for six consecutive years or more.

After residing in China for an aggregate of 183 days or more within a year for six consecutive years, a resident individual without a domicile who does not meet the preferential conditions specified in Article 4 of Implementation Regulations shall calculate and pay individual income tax on all salaries and wages earned both within and outside China.

3. Where the individual without a domicile is a senior management member

For a resident individual without a domicile who is a senior management member, his/her income from salaries and wages shall be taxed in accordance with the provisions of Item 2 of this Article. For a non-resident individual who is a senior management member, the taxation issues shall be handled as follows:

(1) Where the senior management member’s cumulative residence in China does not exceed 90 days.

For a senior management member whose cumulative residence within China does not exceed 90 days within a tax year, salaries and wages paid or borne by an employer within China shall be subject to individual income tax; salaries and wages not paid or borne by an employer within China shall not be subject to individual income tax. The monthly salary and wage income amount shall be the amount paid or borne within China for that same month.

(2) Where the senior management member’s cumulative residence in China exceeds 90 days but is less than 183 days.

For a senior management member whose cumulative residence in China exceeds 90 days but is less than 183 days within a tax year, his/her salaries and wages received shall be subject to individual income tax, except for the portion attributable to work periods outside China and not paid or borne by employers within China. The monthly salary and wage income amount shall be calculated using Formula 3 in this Announcement.

III. Tax Calculation for Individuals Without a Domicile

1. Provisions on Tax Calculation for Resident Individuals Without a Domicile

Resident individuals without domicile with comprehensive income shall calculate individual income tax annually after the end of the tax year. Where there is a withholding agent, the agent shall withhold and prepay tax monthly or on a transaction-by-transaction basis. Where the annual reconciliation is required, it shall be processed as prescribed. The formula for calculating the annual comprehensive income tax payable is as follows (Formula 4):

Annual Comprehensive Income Tax Payable = (Annual Salaries and Wages Income Amount + Annual Remuneration for Personal Services Income Amount + Annual Author’s Remuneration Income Amount + Annual Royalties Income Amount - Deductible Expenses - Special Deductions - Itemized Deductions for Specific Expenditures - Other Legally Determined Deductions) × Applicable Tax Rate - Quick Calculation Deduction

Resident individuals without a domicile who are foreign nationals may not concurrently apply for itemized deductions for specific expenditures when calculating salary and wage income amount prior to January 1, 2022, if they have already deducted eight types of allowances including housing subsidies, children’s education expenses, language training fees, etc., as required.

Annual salaries and wages, remuneration for personal services, author’s remuneration, and royalties income amounts shall be calculated based on the total monthly salaries and wages received during the year, as well as the total amount of remuneration for personal services, author’s remuneration, and royalties received each time.

2. Provisions on Tax Calculation for Non-resident Individuals

(1) For monthly salary and wage income received by a non-resident individual, the taxable income shall be calculated as the monthly income amount determined under Article II of this Announcement minus the deductible expenses stipulated by Tax Law. The tax payable shall be calculated using the Monthly-Converted Comprehensive Income Tax Rate Table attached to this Announcement (hereinafter referred to as the Monthly Tax Rate Table).

(2) Where a non-resident individual receives bonuses covering multiple months within a single month, the monthly income shall be calculated separately in accordance with Article II of this Announcement. Such income shall not be combined with other salaries and wages for that same month. The taxable amount shall be calculated by allocating the bonus over six months without deducting expenses and using the Monthly Tax Rate Table. This tax calculation method shall only be applied once per non-resident individual within a calendar year. The calculation formula is as follows (Formula 5):

Tax Payable on Multi-month Bonuses Received Within a Month = [(Multi-Month Bonuses Income Amount ÷ 6) × Applicable Tax Rate - Quick Calculation Deduction] × 6

(3) For equity incentive income received by a non-resident individual within a single month, the monthly income shall be calculated separately in accordance with Article II of this Announcement. Such income shall not be combined with other salaries and wages for that same month. The taxable amount shall be calculated by allocating the income over six months (equity incentive income within a single calendar year shall be aggregated for calculation) without deducting expenses. The tax payable shall be calculated using the Monthly Tax Rate Table. The calculation formula is as follows (Formula 6):

Tax Payable on Monthly Equity Incentive Income = [(Total Equity Incentive Income Amount Within the Current Calendar Year ÷ 6)× Applicable Tax Rate - Quick Calculation Deduction] × 6 - Tax Already Paid on Equity Incentive Income Within the Current Calendar Year

(4) For a non-resident individual receiving remuneration for personal services, author’s remuneration, or royalties sourced within China, the taxable income is the amount of each payment as defined by Tax Law. The tax payable is calculated using the Monthly Tax Rate Table.

IV. Application of Tax Treaties to Individuals Without a Domicile

Individuals who are tax residents of the other Contracting State under the residency provisions of agreements concluded by the Chinese government for the avoidance of double taxation, or the arrangements for the avoidance of double taxation concluded between the Chinese Mainland and Hong Kong SAR or Macao SAR (hereinafter referred to as “tax treaties”), may enjoy tax treaty benefits in accordance with the relevant provisions of the tax treaties and the Ministry of Finance and the State Taxation Administration, or may choose not to enjoy such benefits when calculating their tax payable. Unless otherwise stipulated in the tax treaties or by the Ministry of Finance and the State Taxation Administration, the application of tax treaties to individuals without a domicile shall be governed by the following provisions:

1. Provisions With Respect to the Application of the Employment Income Clause to Individuals Without a Domicile

(1) Individuals without a domicile enjoying the treaty benefits for employment income earned outside China.

For the purposes of this Announcement, the treaty benefits for employment income earned outside China mean that, in accordance with the provisions of the employment income clause of the tax treaty, employment income earned by a resident individual of the other Contracting State from employment activities conducted outside China shall be exempt from individual income tax.

Where an individual without a domicile is a resident individual of the other Contracting State and the salaries and wages received by such individual qualify for the treaty benefits for employment income earned outside China, such income shall be exempt from individual income tax. The calculation of salary and wage income shall apply Formula 2 of this Announcement.

Resident individuals without a domicile who are tax residents of the other Contracting State may enjoy the treaty benefits under the preceding paragraph at the time of the withholding and prepayment as well as the annual reconciliation. Non-resident individuals who are tax residents of the other Contracting State may enjoy the treaty benefits under the preceding paragraph upon receiving the income.

(2) Individuals without domicile enjoying treaty benefits for employment income earned within China.

For the purposes of this Announcement, the treaty benefits for employment income within China mean that a tax resident individual of the other Contracting State, who stays within China for no more than 183 days during the period specified in the tax treaty, engages in employment activities within China, and receives employment income that is not paid or withheld by a resident employer within China, nor borne by the employer’s permanent establishment within China, shall be exempt from individual income tax.

Individuals without a domicile who are tax residents of the other Contracting State may be exempt from individual income tax on their income from salaries and wages if such income qualifies for the treaty treatment for employment income earned within China. The calculation of salary and wage income shall apply Formula 1 of this Announcement.

Resident individuals without a domicile who are tax residents of the other Contracting State may enjoy the treaty benefits under the preceding paragraph at the time of the withholding and prepayment as well as the annual reconciliation. Non-resident individuals who are tax residents of the other Contracting State may enjoy the treaty benefits under the preceding paragraph upon receiving the income.

2. Provisions With Respect to the Application of Independent Personal Services or Business Profits Clauses to Individuals Without a Domicile

For the purposes of this Announcement, the treaty benefits for independent personal services or business profits mean that where the income from independent personal services or business profits obtained by a tax resident individual of the other Contracting State meets the conditions specified in independent personal services or business profits clauses of the tax treaty, such income shall be exempt from individual income tax.

Where a resident individual without a domicile is a tax resident of the other Contracting State and his/her remuneration for personal services and author’s remuneration is entitled to the treaty benefit for remuneration for independent personal services or business profits, the individual shall be exempt from individual income tax at the time of the withholding and prepayment as well as the annual reconciliation.

Where a non-resident individual is a tax resident of the other Contracting State and his/her remuneration for personal services and author’s remuneration is entitled to the treaty benefit for remuneration for independent personal services or business profits, the individual shall be exempt from individual income tax upon receiving the income.

3. Provisions With Respect to the Application of the Directors’ Fees Clause to Individuals Without a Domicile

Where a tax resident individual of the other Contracting State is a senior management member, whose applicable tax treaty does not include a directors’ fees clause, or includes such a clause but the individual is ineligible for its benefits, and the remuneration received by such individual as a senior management member qualifies for the treatment under the treaty provisions on employment income, independent personal services, or business profits, the remuneration received by such individual as a senior management member shall not be subject to the provisions of Item 3 of Article II of this Announcement, but shall be governed by the provisions of Item 1 and 2 of this Article respectively.

Where the individual is a tax resident of the other Contracting State and is a senior management member, and the remuneration received by such individual as a senior management member is subject to individual income tax within China in accordance with the provisions of the directors’ fees clause of the tax treaty, individual income tax shall be levied in accordance with the relevant provisions on salaries and wages or remuneration for personal services.

4. Provisions With Respect to the Application of Royalties or Technical Service Fees Clauses to Individuals Without a Domicile

For the purposes of this Announcement, the treaty treatment for royalties or technical service fees means that where a tax resident individual of the other Contracting State receives royalties or technical service fees meeting the prescribed conditions in accordance with royalties or technical service fees clauses of the tax treaty, such income may be taxed based on the taxable income amount and tax rates specified in the tax treaty.

Where an individual without a domicile is a tax resident of the other Contracting State and receives royalties, author’s remuneration, or remuneration for personal services that qualify for the treaty treatment for royalties or technical services, such income may not be included in comprehensive income. Instead, the taxable amount and tax rates specified in tax treaties shall be used to calculate the tax payable in the month of receipt, and tax shall be withheld and prepaid accordingly. At the time of the annual reconciliation, income received by such individuals that has already enjoyed treaty treatment for royalties or technical service fees shall not be included in the annual comprehensive income. Instead, the annual tax payable and any tax refund or supplemental tax payment shall be calculated separately based on the taxable income and tax rates specified in the tax treaty.

Non-resident individuals who are tax residents of the other Contracting State and whose income from royalties, author’s remuneration, or remuneration for personal services qualifies for the treaty treatment for royalties or technical service fees may calculate their tax payable based on the taxable income amount and tax rates specified in tax treaties.

V. Administrative Provisions With Respect to Individuals Without a Domicile

1. Provisions With Respect to Estimated Residence Period Within China for Individuals Without a Domicile

When filing their first tax return within a tax year, individuals without a domicile shall estimate their days of residence in China for that tax year and their days of stay in China within the period specified in the tax treaty based on contractual agreements and other circumstances, and calculate and pay taxes accordingly. Where actual circumstances differ from estimates, the following provisions shall apply:

(1) If an individual without a domicile is initially classified as a non-resident individual but subsequently meets the residency criteria due to an extended stay, the tax withholding method for that tax year remains unchanged. After the year-end, the individual shall complete the annual reconciliation in accordance with the relevant regulations for resident individuals. However, if the individual leaves the country during the year and is not expected to re-enter within the year, he/she may choose to complete the annual reconciliation before departure.

(2) If an individual without a domicile initially classified as a resident individual subsequently fails to meet residency criteria due to reduced days of stay, the individual shall report it to the tax authority in charge within 15 days from the date when he/she does not meet residency criteria to the end of the year. Tax payable shall be recalculated as a non-resident individual, and the individual shall file a tax return and make a supplemental tax payment without overdue payment surcharges. Refunds, if applicable, shall be processed in accordance with regulations.

(3) Where an individual without a domicile who anticipates staying in China for no more than 90 days in a tax year but actually stays longer than 90 days, or a tax resident of the other Contracting State who anticipates staying in China for no more than 183 days within the period specified in the tax treaty, but the actual stay exceeds 183 days, the individual shall report it to the tax authority in charge within 15 days after the end of the month in which the 90-day or 183-day threshold is reached. The individual shall recalculate the tax payable on the salary and wage income from previous months and make a supplemental tax payment without overdue payment surcharges.

2. Provisions With Respect to Reporting by Employers Within China of Individuals Without a Domicile Regarding Salary and Wage Income Paid by Associated Parties Outside China

Where an individual without a domicile earns salaries and wages sourced within China through employment or engagement, and the employer within China has an associated relationship with an entity or individual outside China, resulting in the salaries and wages, which shall be paid by the employer within China but paid in part or in full by the associated party outside China, the individual without a domicile shall either file and pay taxes by themselves or entrust the employer within China to pay taxes on their behalf. Where the individual without a domicile does not entrust the employer within China to pay taxes on their behalf, the employer within China shall report relevant information to the tax authority in charge within 15 days after the end of the month in which the relevant income is paid. Such information includes the work arrangements for the individual without a domicile made by the employer within China and the associated party outside China, the details of payments outside China, and the contact information of the individual without a domicile.

VI. This Announcement shall enter into force from January 1, 2019. Non-resident individuals who have overpaid taxes under the original provisions for income obtained after January 1, 2019, may apply for a tax refund in accordance with the law. The following documents or provisions thereof shall be repealed on January 1, 2019:

1. Circular of the Ministry of Finance and the State Taxation Administration on Several Issues With Respect to the Exemption and Levy of Individual Income Tax for Temporary Visitors to China Based on Actual Residence Dates ((88) Cai Shui Wai Zi No. 059);

2. Circular of the State Taxation Administration With Respect to Tax Obligations for Individuals Without a Domicile in China Earning Wage and Salary Income (Guo Shui Fa [1994] No. 148);

3. Circular of the Ministry of Finance and the State Taxation Administration With Respect to Calculating Five Years of Residence in China for Individuals Without a Domicile in China (Cai Shui Zi [1995] No. 98);

4. Articles 1, 2, 3, and 4 of Circular of the State Taxation Administration on Several Specific Issues With Respect to the Calculation and Payment of Individual Income Tax by Individuals Without a Domicile in China (Guo Shui Han Fa [1995] No. 125);

5. Circular of the State Taxation Administration on Several Issues With Respect to the Payment of Income Tax by Individuals Without a Domicile in China Involving Tax Treaties (Guo Shui Fa [1995] No. 155);

6. Circular of the State Taxation Administration With Respect to Taxation of Bonuses Received by Individuals Without a Domicile in China (Guo Shui Fa [1996] No. 183);

7. Reply of the State Taxation Administration With Respect to Determining Tax Payable for Foreign Employees of Mitsui & Co., Ltd. Dalian Office Receiving Multi-month Bonuses (Guo Shui Han [1997] No. 546);

8. Circular of the State Taxation Administration With Respect to Withholding and Paying Individual Income Tax by Foreign-Invested Enterprises and Foreign Enterprises for Salaries and Wages Paid to Employees of Enterprises Outside China (Guo Shui Fa [1999] No. 241);

9. Circular of the State Taxation Administration With Respect to Determining Tax Obligations for Monthly Bonuses Received by Individuals Without a Domicile in China for Work Not Performed in China (Guo Shui Han [1999] No. 245);

10. Circular of the State Taxation Administration on Issues With Respect to the Determination of Tax Obligations for Individuals Without a Domicile in China Who Receive Salaries and Wages in the Form of Securities (Guo Shui Fa [2000] No. 190);

11. Circular of the State Taxation Administration on Several Issues With Respect to the Implementation of Tax Treaties and Individual Income Tax Law for Individuals Without a Domicile in China (Guo Shui Fa [2004] No. 97);

12. Article 6 of Circular of the State Taxation Administration With Respect to Adjusting the Method for Calculating and Levying Individual Income Tax on Annual One-Time Bonuses (Guo Shui Fa [2005] No. 9);

13. Reply of the State Taxation Administration on Issues With Respect to Calculating and Paying Individual Income Tax on Wages and Salaries for Individuals Without a Domicile in China (Guo Shui Han [2005] No. 1041);

14. Reply of the State Taxation Administration With Respect to the Application of the Formula for Calculating Individual Income Tax for Individuals Without a Domicile Holding Director or Senior Management Positions in China (Guo Shui Han [2007] No. 946).

It is hereby announced.

Annex: Monthly-Converted Comprehensive Income Tax Rate Table.doc

Ministry of Finance
State Taxation Administration
March 14, 2019

All information in this document is authentic in Chinese. English is provided for reference only. In case of any discrepancy, the Chinese version shall prevail.