China Tax Residency & The 183-Day Rule

Whether you are a tax resident in China significantly impacts your tax liability. Your status determines if you pay tax only on your China-sourced income or on your worldwide income.

Generally, non-residents pay tax only on income derived from within China. Residents, however, may be subject to Individual Income Tax (IIT) on their global income, depending on the length of their residency.

For foreign individuals (including residents of Hong Kong, Macau, and Taiwan), tax residency in China is primarily determined by the "183-Day Rule" within a calendar year (January 1 to December 31).

The 183-Day Rule

According to China's Individual Income Tax Law, a foreigner is considered a tax resident if they reside in China for 183 days or more in a calendar year.

• Less than 183 days: You are generally considered a non-resident.
• 183 days or more: You are considered a tax resident for that year.

The "Six-Year Rule"

Foreign individuals who reside in China for 183 days or more in a tax year but not more than six consecutive years will be subject to tax on both their China-source income and their foreign-source income. However, as a concession, foreign-source income is taxed only to the extent of income paid and/or borne by a China entity or individual.

This means that spending 183+ days in one year generally does not trigger tax on your full worldwide income as long as you fall within the six-year concession period.

Foreigners who are tax residents (staying 183 days or more) for six consecutive years will be subject to tax on their worldwide income starting from the seventh year. However, this can be avoided (the count can be "reset") if:

• You reside in China for fewer than 183 days in any single tax year within the six-year period, OR
• You leave China for a single trip of more than 30 consecutive days within any year where you would otherwise be a resident.

Successfully managing this "reset" is crucial for expatriates wishing to avoid taxation on their global income.

Counting Days is Critical

Accurate day counting is the single most important factor in determining your status.

• Each day of physical presence in Mainland China counts.
• To avoid the 183-day threshold, you must strictly monitor your days.
• To utilize the "Six-Year Rule" reset, you must verify a single trip of over 30 days or ensure a year with fewer than 183 days.

What Counts as a Day?

For tax residency purposes, a day in China is generally counted only if the individual is physically present in China for a full 24 hours.

This means that days of arrival and departure, where the stay in China is less than 24 hours, typically do not count as a full day of residence under current regulations (effective since Jan 1, 2019). This distinction is critical for individuals whose stay is close to the 183-day threshold.

Conclusion

Navigating China's tax residency rules requires precise record-keeping. Whether you are trying to stay under the 183-day limit or planning a "tax break" trip to reset your six-year clock, relying on memory or loose records is risky.

The Domicile365 App provides the defensible, GPS-based evidence you need to prove your location and manage your day count effectively.

Take control of your tax planning and ensure compliance by downloading the Domicile365 App today for Apple iOS or Google Android.

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