Announcement on IIT Policies for Non-Resident Individuals and Individuals Without Domicile in China

关于非居民个人和无住所居民个人有关个人所得税政策的公告

Joint Announcement of the Ministry of Finance and the State Taxation Administration, [2019] No. 35 (财政部 税务总局公告2019年第35号). Issued March 14, 2019; retroactively effective January 1, 2019.

Sources:

• Chinese official text: STA Policy Database (fgk.chinatax.gov.cn, requires login) · Shanghai STA mirror (publicly accessible)
• Referenced analysis: KPMG China Tax Alert, Issue 11, March 2019 (PDF)
• OECD residency information: OECD — China: Information on Residency for Tax Purposes (PDF)

This announcement supplements the Individual Income Tax Law (as amended 2018) and Implementation Regulations (State Council Order No. 707), providing detailed guidance on the tax treatment of non-resident individuals and resident individuals without domicile in China (collectively "non-domiciled individuals").

---

Contents

• Part I — Income Source Rules
• Part II — Calculation of Wage and Salary Income
• Part III — Tax Calculation for Bonus and Equity Income
• Part IV — Application of Tax Treaties
• Part V — Administration and Filing Rules
• Summary — Taxation by Residency Duration

---

Part I — Income Source Rules

Workday Counting Rules

To determine PRC-sourced employment income, the following workday rules apply:

• A workday in China includes any calendar day spent in China for business purposes, plus public holidays, personal leave and training days that accrue to one's PRC employment, regardless of whether they are conducted inside or outside China.
• A calendar day during which the individual is present in China for less than 24 hours shall be counted as half a workday.

Employment Income Source Rules

PRC-sourced employment income shall be determined as follows:

• Wages and salaries: Income earned for work performed in China is PRC-sourced, regardless of whether the payment is made from within or outside China.
• Bonuses and stock options: The PRC-sourced portion is determined based on the ratio of PRC workdays to total calendar days in the relevant period.
• Directors, supervisors and senior executives of PRC-resident enterprises: All wages and remuneration (including bonuses and stock options) paid or borne by the domestic resident enterprise are considered PRC-sourced income, regardless of where duties are performed.
• Author's remuneration: Income paid or borne by domestic enterprises, business organizations or other entities is PRC-sourced income.

---

Part II — Calculation of Wage and Salary Income

The method for calculating PRC taxable wage and salary income depends on the individual's position (senior executive vs. non-senior executive) and duration of physical presence in China.

Scenario A: Physical presence ≤ 90 days (or ≤ 183 days under DTA)

Non-senior executives:

Monthly taxable income = (Total wages paid by PRC and abroad) × (Wages paid by PRC / Total wages paid by PRC and abroad) × (PRC workdays during the month / Total calendar days in the month)

Only PRC-paid, PRC-worked income is taxable. Income paid by overseas entities for PRC workdays is exempt.

Senior executives:

Monthly taxable income = Income paid in or borne by PRC

All PRC-paid or PRC-borne income is taxable regardless of where duties were performed.

Scenario B: Physical presence > 90 days but < 183 days

Non-senior executives:

Monthly taxable income = (Total wages paid by PRC and abroad) × (PRC workdays during the month / Total calendar days in the month)

All income attributable to PRC workdays is taxable, whether paid from PRC or abroad.

Senior executives: Same formula as Scenario C below (not Scenario A):

Monthly taxable income = (Total wages paid by PRC and abroad) × [1 − (Wages paid by abroad / Total wages paid by PRC and abroad) × (Days outside PRC during the month / Total calendar days in the month)]

Scenario C: Physical presence ≥ 183 days but ≤ 6 consecutive years

The individual is a resident taxpayer but may still exempt overseas-sourced income paid by overseas entities under the six-year rule.

Monthly taxable income = (Total wages paid by PRC and abroad) × [1 − (Wages paid by abroad / Total wages paid by PRC and abroad) × (Days outside PRC during the month / Total calendar days in the month)]

Scenario D: Physical presence ≥ 183 days for > 6 consecutive years

The individual is subject to PRC IIT on worldwide income — all PRC and foreign-sourced income is taxable in China.

---

Part III — Tax Calculation for Bonus and Equity Income

Bonus Income (Non-Resident Individuals)

Bonus income received by a non-resident individual in a given month is not combined with regular wage income. Instead, it is amortized over 6 months:

Tax payable on bonus = [(Bonus amount ÷ 6) × Applicable rate − Quick deduction] × 6

This preferential calculation method may only be applied once per calendar year for each non-resident individual.

Equity Incentive Income (Non-Resident Individuals)

Equity incentive income (stock options, restricted stock units, etc.) received in a month is calculated separately from wages:

Tax payable on equity income (current month) = [(Cumulative equity income in current calendar year ÷ 6) × Applicable rate − Quick deduction] × 6 − Tax already paid on equity income in current calendar year

---

Part IV — Application of Tax Treaties

Non-domiciled individuals who are tax residents of a country with which China has concluded a double taxation avoidance agreement (DTA) may enjoy treaty benefits:

• Employment income: Where all conditions under the DTA "dependent personal services" (or "income from employment") article are met, the individual may be exempt from PRC IIT.
• Director's fee article: Where the DTA does not contain a "director's fee" article, or where the article is not applicable to the individual, the individual may elect to use the non-senior-executive formula (based on workdays) instead of the senior executive formula.
• Royalties and technical services: Income may be taxed at the reduced rate specified in the DTA (e.g., 10%) instead of the domestic 20% rate.

Where treaty benefits apply, the income is excluded from comprehensive income and taxed separately at the treaty rate.

---

Part V — Administration and Filing Rules

Estimated vs. Actual Residency

When filing tax for the first time in a tax year, non-domiciled individuals shall estimate their expected physical presence in China based on contractual arrangements and personal circumstances:

Employer Reporting Obligations

Where a non-domiciled individual is paid PRC-sourced employment income by an overseas affiliated entity, the domestic employer has a reporting obligation. The individual may either:

• Authorize the domestic employer to withhold and pay tax on the overseas-paid income, or
• File and pay tax individually.

If the individual does not authorize the employer, the employer must report the following to the tax bureau within 15 days after the end of each month:

1. Work arrangement of the non-domiciled individual;
2. Overseas payment amounts; and
3. Contact details of the non-domiciled individual.

Repealed Documents

This announcement repeals 14 previous documents or provisions relating to taxation of non-domiciled individuals, including Caishui Waizi [1988] No. 059, Guoshuifa [1994] No. 148, Guoshuifa [1995] No. 155, and others.

---

Summary — Taxation by Residency Duration

---

Note: This is an unofficial translation. No official English text of MOF/STA [2019] No. 35 has been published. The Chinese original on fgk.chinatax.gov.cn (login required) or Shanghai STA (public) is authoritative. Third-party analyses from KPMG, BDO, and China Briefing were used for cross-reference.