The Government of the People's Republic of China have made some significant changes concerning the Individual income tax reform that came into force in January 2019.
The new IIT Law adopts a 183-day rule to define a resident and non-resident in Mainland China in accordance with international taxation practice.
The regulations on the implementation of IIT has clarified that foreigners in Mainland China will only be subject to IIT on their worldwide income starting from the seventh year if they have resided in Mainland China for 183 days or more each year for six consecutive years, and have not left Mainland China for 30 days or more consecutively during those six years.
In general, a tax residency certificate is crucial for multinational companies and individuals when applying for tax benefits under international tax treaties (i.e. Double taxation agreements with China - DTA).
When a foreign business or an individual produces income in China, it may be subject to tax in both the business or the individual’s home country and China, which could substantially increase their tax burden.
However, the process of applying for DTA benefits, and fiscal benefits in general, could require many documents. The tax residency certificate is one such document and it’s extremely useful when it comes to tax benefit applications as well as being a crucial and necessary condition to meet in order to apply for such a fiscal benefit.
In order to apply for the tax residency certificate, the local tax bureau requires the individual to provide the following documents:
- The application form (available on the local tax bureau official website)
- Original passport and copy;
- Copy of the tax registration certificate of the employer;
- The original PRC individual income tax and other tax payment receipts (issued by the local tax bureau)
- Supporting documents for PRC residence days (entry chops on the passport)
- Other supporting documents required by the tax authority in charge
The application procedure and the time required for issuing the certificate can vary by region and tax authority in charge (in Shanghai, for example, the tax authorities can issue the certificate in five business days).