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Complying with China’s Newly Revised Individual Income Tax (IIT) Law 2019

Addressing the Implications of Expatriates Working in China

Expert Speaker Bolivia Cheung

$898.80 (including GST)

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EARLY BIRD SPECIAL: Save 10% when you register by 18 Mar 2019. Use code MAR19 at checkout.

Overview

HOT: Major IIT Rules Just Out!

 

China government amended the Individual Income Tax (IIT) Law which took effect from 1 January 2019.

 

A major set of new IIT rules affecting foreigners were just issued in mid-March which significantly changed the definitions under the China tax law for foreigners.

 

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 on the new IIT rules released in Mid-March and stay compliant

  • 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

 

Programme Outline

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.

  • The counting of days of residence has changed – only a 24-hour day in China is counted as “one day” – how will this affect foreigners working in China?

  • 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?

  • How to reset the counting of years of tax residence?  How about the treatment of 2018 and before?

  • 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?

  

Issue 2: Taxability on offshore salaries

Due to the change of counting number of days of residence, it is much easier for travelers to be exempt from China IIT.  There are formula 1, formula 2 and formula 3 for foreigners with onshore and offshore salaries.  Both salaries should be combined and applied the new time apportionment method, which is totally different from the past.

  • Why dual contracts cannot work?

  • A foreigner (including Hong Kong, Macau and Taiwan for tax purposes) travels to China to work every day and return to Hong Kong with all salaries paid outside China can be exempt from China IIT

  • A foreigner travels to China on Monday and leave on Wednesday every week with all salaries paid outside China can be exempt from China IIT

  • A foreigner travels to China on Monday and leave on Friday every week with all salaries paid outside China has to pay China IIT by using formula 2 and is not a China tax resident

  • A foreigner gets part of the salaries paid in China and part of the salaries paid outside China and travels to China on Monday and leaves on Wednesday should use formula 1 to calculate

  • What are the formulae?

  • What are the critical points of “days of residence” which affect the tax calculation?

  • Who is liable to report the offshore salary?  The employer or the employee? 

  

Issue 3: 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 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?

  • What are the other methods to remit salaries out from China?

  

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?

  • If one is considered as a tax resident and finally becomes a non-resident, what should be done?

  • If one is considered as a non-resident and finally becomes a tax resident, what should be done?

  

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: 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 9: Annual bonus

Tax resident can opt to use the special method to calculate annual bonus during the three-year transitional period. Non-resident has a different time-apportion method to calculate the IIT on bonus?

  • How to calculate the IIT for different types of people?

  • How to structure in order to reduce the IIT?

  • Who should opt the old method?

  • What is the optimum amount of bonus which can reduce tax?

  

Issue 10: 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?

Expert Speaker

Bolivia Cheung
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: email sg-events@wolterskluwer.com

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