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China government amended the Individual Income Tax (IIT) Law which took effect from 1 January 2019.
How will the new law affect expatriates working in China from a Singapore context? What are the common problems relating to secondment of staff to China?
In this highly practical workshop, the trainer will explain the important issues arising from China’s new IIT law and will demonstrate best practice approaches in overcoming these HR challenges, through the use of practical examples.
What You Will Learn
At the end of this workshop, you will:
- Be updated and compliant with China’s new IIT Law
- Find out the effect of the new law on expatriates working in China from a Singapore context
- Learn the common practical challenges faced in the secondment of staff from Singapore to China
- Benefit from practical lessons and case examples in addressing the critical issues arising from China’s latest IIT law
Issue 1: Worldwide Tax and Tax Break
According to Article 1 of the Law, an individual without China domicile spending 183 days in a calendar year becomes a China tax resident and will be subject to China IIT on worldwide income. Tax break is still possible for foreigners to avoid worldwide tax.
- What is meant by “domicile”?
- Will a Singaporean with an apartment in China be considered as having China domicile?
- How to arrange for tax break from 2019 onwards?
- If a foreigner has dual tax residency (e.g. US and China) and each country of tax residence imposes worldwide tax, how should this be resolved?
- While offshore income can be tax exempt, should this be reported to the China tax authority?
- Is the Chinese employer liable to withhold IIT on salaries paid outside China? If yes, what is the penalty on non-withholding of offshore salaries?
- What is the penalty on non-declaration of offshore income? Will this be a criminal offence?
Issue 2: Tax Exempt Allowances
Six specific additional deductions are introduced for all individuals, namely: children education, continued education, major illness medical expenses, mortgage interest, rental expenses and support of the elderly. Expatriates can opt to use the old method and enjoy the eight tax exempted allowances. Foreigners can opt the previous eight tax exempt allowances during the three-year transitional period.
- Which one can reduce the tax burden?
- How will this affect the employment contracts of expatriates which state that invoices (FaPiaos) should be provided to HR in order to get tax exemption?
- Which types of allowances are taxable under the new IIT Law?
Issue 3: Overseas Salaries
It is common for seconded staff to receive salaries from overseas employer
- If the staff is not subject to China worldwide tax, will the salary paid in Singapore be taxable in China? Is it “offshore” income?
Issue 4 : Recharge of Salaries Paid Overseas to Chinese Subsidiary
- Singapore headquarters charged back the salaries paid in overseas to the Chinese subsidiary. IIT has been fully paid
- What are the documents required so as to remit the recharged salaries to overseas?
- Which type of secondment charges cannot be remitted?
Issue 5: Tax Withholding and Annual Filing
- The new IIT Law introduces the mechanism of a combination of provisional withholding by employer and annual filing (with tax refund, if any)
- The monthly provision withholding is on the “cumulative basis”, what is the difference between the previous monthly IIT calculation?
- Under the “cumulative basis”, the IIT withheld is lower in January and higher in December. Why?
- What are the implications on tax equalization policy?
- What are the responsibilities of employers?
- What are the responsibilities of employees?
Issue 6: Salaries vs Service fee
- IIT for service fee is 20% lower than IIT for salaries
- What are the differences between service fee and salaries from tax and social security perspectives?
- Is it possible to restructure and turn the general manager into a consultant?
Issue 7: Tax Exemption under Treaty
- Will the new IIT Law affect the exemption under tax treaty?
- How can foreigners working in China enjoy the exemption under tax treaty?
- What are the procedures to apply for treaty exemption?
Issue 8: Dual Contracts
- Can dual contracts help in reducing IIT?
- Which types of dual-contract arrangement can work and which types cannot?
Issue 9: Anti-avoidance
- The new IIT Law introduces anti-avoidance article. How will it affect foreigners working in China?
- A foreigner invested in China via a Singapore holding company. Will the “look through” concept apply for the sale of SingCo shares by the foreigner and hence, be subject to 20% China IIT?
Issue 10: Annual bonus
Tax resident can opt to use the special method to calculate annual bonus during the three-year transitional period.
- Who should opt the old method?
- What is the optimum amount of bonus which can reduce tax?
Issue 11: Other Issues
- Employees received stock option of the overseas listed company. What are the tax and non-tax issues which should be considered? After paying IIT, can the amount charged-back to Chinese subsidiary be remitted overseas?
- The Singapore employee is going to retire and wants to sell the apartment in China. Can the proceeds be remitted overseas?
FCCA , FCPA
Bolivia has more than 20 years of experience in China tax and business advisory. She had spent 15 years in KPMG, before retiring as a Tax Partner in 2011.
Having stationed in Guangzhou and Shanghai for over 8 years, she has vast experience in helping clients deal with their tax problems and challenges
Bolivia is currently a member of the ACCA China Forum, and was also in the Steering Team of ACCA Southern China from 2004 to 2017. She is a Member of Working Party on Seminars of Accountancy Training Board of Hong Kong Vocational Training Council, and also a Member of the Customer Liaison Group for SMEs of the Trade and Industry Department of the Hong Kong SAR. She also lectures on China Tax in Universities and Institutions in Macau, Hong Kong and China.
Enquiries: 6211 3935; firstname.lastname@example.org / 6211 3939; email@example.com