"Shanghai Unlock" is a service initiative by Jing'an district that provides comprehensive guidance on customs clearance, employment, entrepreneurship, and daily life for international residents in Shanghai.

The fifth session of "Shanghai Unlock" was held at Jing'an Global Connect on July 17. The event invited two staff members from the Jing'an District Tax Bureau to explain tax policies.

The speakers outlined the basic policy framework for individual income tax for foreign nationals, criteria for determining tax residency status, tax filing procedures, and tax incentives available to them, including the scope of tax-exempt allowances and subsidies, the rules for special additional deductions, and how to claim them.

During the interactive Q&A session, participants raised questions about practical issues such as relief from cross-border double taxation, tax refund applications during the annual settlement, tax payment requirements for permanent residence applications, and tax clearance before departure.

In addition, the "Shanghai Unlock" series has developed a one-stop service model that integrates content sharing, personalized consultation, and immediate assistance. Some participants were able to resolve issues they had raised during the session at the service counters immediately afterward.

Q&A

Q: How is it determined whether a foreign national is a resident individual or a non-resident individual?

A: The determination is based on two statutory criteria: the number of days a foreign national has resided in China and whether the individual has a domicile in China.

- Resident individual: An individual who has a domicile in China, or who has no domicile in China but has resided in China for at least 183 days in a tax year.

- Non-resident individual: An individual who has no domicile in China and does not reside in China, or who has no domicile in China and has resided in China for a total of less than 183 days in a tax year.

Note: Tax residency is not equivalent to nationality; "having a domicile in China" means habitually residing in China due to household registration, family ties, or economic interests, and is unrelated to whether the individual owns a property in China.

 

Q: What is the procedure for foreign nationals to pay individual income tax?

A: The process can be divided into two main stages.

Stage 1: Withholding by the withholding agent. After starting employment, foreign nationals should provide their passport numbers and other required information to their employer, which, as the withholding agent, withholds and remits individual income tax monthly.

Stage 2: Annual tax settlement. This stage applies only to resident individuals. Non-resident individuals are not required to go through this process.

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How to file taxes

 

Q: How do resident individuals file the annual individual income tax settlement via the Individual Income Tax app?

A: Register or log in to the Individual Income Tax app. Foreign nationals may use facial recognition if their ID type is supported; otherwise, they can obtain a registration code at a tax service hall with a valid ID document. Then select "Annual IIT Settlement" → enter the number of days you resided in China → verify your income and deductions → choose the tax calculation method for your bonus → confirm the amount of tax payable or refundable and complete the payment or refund process. If applying for a refund, provide a qualifying bank account opened in China; a Class I account is recommended.

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Individual income tax annual settlement

 

Q: What tax calculation methods are available for the annual one-time bonus, and how should taxpayers choose between them?

A: For resident individuals, there are two tax calculation methods. They can choose one during the annual settlement:

(1) Consolidated into comprehensive income: Include the annual one-time bonus in comprehensive income for tax calculation;

(2) Separate taxation: Select one bonus for separate taxation, with the rest consolidated into comprehensive income.

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How should your annual bonus be taxed?

 

Q: What tax-exempt allowances and subsidies are available to foreign nationals?

A: There are eight categories of tax-exempt allowances and subsidies: housing subsidies, meal allowances, laundry fees, relocation reimbursements, domestic and overseas business travel allowances, home-leave travel expenses for up to two trips per year, language training subsidies, and children's education subsidies.

Note: Eligibility, exemption limits, and documentation requirements vary by category. Taxpayers should retain relevant supporting documents for verification.

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Tax benefits for expats in China

 

Q: What items are included in special additional deductions?

A: Care for children under 3, children's education, continuing education, housing loan interest, housing rent, supporting the elderly, and serious illness medical expenses.

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Special additional individual income tax deductions

 

Q: Can applicants claim tax-exempt allowances and subsidies together with special additional deductions?

A: The following rules apply through Dec 31, 2027:

- Resident individuals: Choose either policy. The two categories of policies cannot be used simultaneously. Once a choice is made, it cannot be changed within a tax year.

- Non-resident individuals: Special additional deductions are not available.

 

Q: Do foreign nationals need to pay tax in China on overseas salary income?

A: It depends on the days of residence, the work location, and the payer entity. The following are the general rules under China's domestic tax law; applicable tax treaties may provide different treatment.

- For residence of 90 days or less: Only income paid or borne by a domestic employer for work performed in China is taxable;

- For residence of more than 90 days but less than 183 days: All salary and wage income attributable to work performed in China is taxable;

- For a resident individual without domicile who has resided in China for at least 183 days in each tax year for fewer than six consecutive years: upon filing with the competent tax authority, all salary and wage income attributable to work performed in China is taxable, while income attributable to work performed outside China is taxable unless it is paid or borne by an entity or individual outside China; 

- If the individual has resided in China for at least 183 days in the current tax year and in each of the preceding six years, with no single departure from China exceeding 30 days in any of those six years, income from both within and outside China is taxable.

- Special rule for senior management: For non-resident individuals serving as directors, supervisors, or senior managers of a resident enterprise in China, remuneration paid or borne by that resident enterprise is China-sourced income regardless of where the duties are performed, subject to applicable tax treaty provisions.

 

Q: Do foreign nationals need to complete tax settlement when leaving China?

A: Not necessarily. A taxpayer without domicile in China who needs to complete the annual individual income tax settlement and leaves China before the annual settlement period begins may complete the settlement before departure. If the individual's initially determined tax residency status changes because the actual length of stay differs from the expected length, the following rules apply:

(1) If an individual initially treated as a resident individual will no longer meet the resident criteria because of a shorter-than-expected stay in China: Report the change to the tax authority at any time from the date it becomes clear that the resident criteria will not be met through 15 days after the end of the tax year, recalculate the tax under non-resident individual rules, and pay any shortfall.

(2) If an individual initially treated as a non-resident individual meets the resident criteria because of a longer-than-expected stay in China: The withholding method remains unchanged throughout the year. After year-end, final settlement is handled under resident individual rules. If the individual leaves China during the year and is not expected to re-enter China during that tax year, settlement may be completed before departure.

Upcoming: "Shanghai Unlock" S06

- Date: August. The exact date will be announced separately.

- Theme: Social insurance and medical insurance for foreign nationals

- Registration: Follow the official WeChat account of "静安人才" (Shanghai Jing'an District Talent Service Center, ID: "jarcfw") for updates

- Contact: 021-2230-4408

 

Source: Official WeChat account of Shanghai Jing'an District Talent Service Center (ID: "jarcfw")