China opens a global tax era!

Big news! China opens a global tax era! Overseas resident Chinese domestic account to be canceled?

 

Recently, Bloomberg News, shock many Chinese citizens working overseas.

 According to the news, China began to tax the overseas income of Chinese citizens, that is, China began to be like the United States, no matter where you work in the world, you need to pay taxes to China, as long as you are a Chinese citizen, as long as you still hold a Chinese passport.

Bloomberg quoted people familiar with the matter as saying that China was tracking taxes on some Chinese citizens living outside the country. People familiar with the matter told Bloomberg that for nearly a while many Chinese state-owned employees in hong kong had been notified of the requirement to declare their global income for 2019 and pay personal income tax in accordance with china's domestic tax laws.

 Staff in Hong Kong have received a tax notice

 In the knowledge, also appeared the title "Big! China opens a global tax era! The post.

 The article quotes Bloomberg reports as well as a screenshot of a suspected Chinese state-owned enterprise in Hong Kong sending employees a "notification letter on the settlement of personal income tax on foreign earnings ".

According to the Circular of the General Administration of Taxation of the Ministry of Finance on the Policy on Personal Income Tax of Overseas Income, the income of Chinese residents from outside China shall be combined with domestic income to calculate the amount of tax payable and to declare and pay taxes annually.

 Of course, this notice is for employees of Chinese mainland enterprises in Hong Kong. But for British, American, Canadian, Australian, New Zealand, Singapore... Maybe it's just a matter of time.

 So who needs to pay taxes?

 Let's first define the concept of Chinese taxpaying residents.

 According to the new tax law issued last year, Article 1 of the Personal Income Tax Law of the People's Republic of China stipulates:

 Individuals who have a domicile in China or who have no domicile and have resided in China for a total of 183 days in a tax year shall be individual residents. Individual income tax shall be paid in accordance with the provisions of this Law for income derived by individual residents from within and outside China.

 If you don't live in China, how do you define a residence? Article 2 of the Regulations on the Implementation of the Personal Income Tax Law of the People's Republic of China states:

 Having residence in China means habitual residence in China because of household registration, family, and economic interests.

 In order to further illustrate this abstract concept, the State Administration of Taxation has further explained the "residence ": for an individual who lives abroad for reasons such as study, work, family visit, travel and so on, and who still lives in China after these reasons have been eliminated, China is the habitual residence of the taxpayer, that is, the individual belongs to the residence in China.

About 60 million Chinese citizens live overseas

 Some people say that I work overseas, if not Chinese state-owned enterprises, if not large Chinese companies abroad, but British companies, or Chinese small and micro-enterprises or companies, how can the country know where I work, and my income and property situation?

 There's away. China has announced that it will begin its seventh census on November 1,2020, targeting natural persons in china at the standard time point and Chinese citizens outside china who have not settled. The so-called settlement refers to the green card or permanent residence right.

 One of the priorities of the census was to clean up outstanding accounts. (Slippery and detailed at the end of the article)

 What is an unsold account? Many of the contents of the circular explained that: conscription into the army, overseas settlement, death, foreign nationality, etc. should be written off in accordance with the provisions of the account and not written off, it is defined as the account should be sold.

 That is to say, whether Chinese who have joined foreign nationality or Chinese who have settled overseas but still hold Chinese nationality may be canceled in this census.

 As soon as the census is over, which of the overseas Chinese tax-paying residents come to light. At present, Chinese state media reports that about 60 million Chinese citizens live overseas.

Pay up to 45% of personal income tax

 According to the relevant tax laws of China, residents are required to pay up to 45% of personal income tax according to the provisions of tax allowances and tax rates. The highest rate in Hong Kong is only one-third of that in mainland China, according to Bloomberg.

 China's vigorous enforcement of tax payments to Chinese citizens abroad means that Chinese citizens working abroad face enormous pressure to pay taxes. This pressure is even greater, especially when the national tax rate in the workplace is significantly lower than that in China.

 Of course, taxing the global income of residents is a more common practice internationally, and countries including Germany and the United States have relevant strict regulations.

 In Germany, for example, the failure to declare foreign income as required is illegal and requires criminal liability. China launched the revised regulations on the implementation of the personal income tax law at the end of 2018, which actually began to go into effect on January 1,2019, but has not yet been fully implemented.

 China's move is bound to cause panic among many foreign Chinese citizens, especially those with investment income overseas, who will pay a fortune if the new rules are strictly enforced.

 However, such an approach could result in a wealthy group of overseas Chinese simply emigrating and becoming nationals of the host country, thus avoiding a global tax on Chinese residents.

CNMOULDING thinks it's an important thing to know for all Chinese around the world. For your life and work, please make arrangements early.