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    Announcement of PRC Individual income tax policies for non-resident individuals and resident individuals having no habitual abode in China

CHINA - Announcement of PRC Individual income tax policies for non-resident individuals and resident individuals having no habitual abode in China

May 2019 

With the view of implementing the revised PRC Individual Income Tax (IIT) Law and the Implementing Regulations of PRC IIT Law, relevant policies for non-resident individuals and resident individuals having no habitual abode (“non-domicile individuals”) in China were announced.

Key updates         

  • Non-domiciled individuals residence status

To determine a non-domiciled individuals’ residence status in China, if they are physically present in China for less than 24 hours in a day, that day will not be counted as a day of residence in China.  

  • Restart of six-year period

Pursuant to the revised PRC IIT Implementing Regulations, non-domiciled individuals who resided in China for more than 6 consecutive years would be taxed on their worldwide income starting from the seventh year if they remained resident in China in that particular year.

The announcement stipulates that the six-year period will be restarted from Year 2019 and thereafter. That is to say, non-domiciled individuals’ residence status in previous years will not be counted towards the six-year period.

  • Update of calculation method for non-domiciled individuals

In the past, income received by non-domiciled individuals from both China and overseas was combined to calculate the total PRC IIT liabilities. Thereafter, the actual China-related IIT liabilities were apportioned based on their days of presence in China.   

The above calculation method has been replaced with an updated calculation method. According to the new calculation method, the Chinese and foreign sourced income will be apportioned based on the non-domiciled individuals' days of physical presence in China. Then the actual China IIT liabilities will be calculated on the apportioned income. 

  • Preferential treatment on annual bonus income and equity based incentive income

Based on the announcement, non-domiciled individuals can be entitled to adopt preferential treatment on bonus and qualified equity based incentive income. For calculation purposes, such income can be treated as separate income and it does not need to be combined with regular wage and salary income. There are specific formulas to use to calculate the tax due. 


  • Non-domiciled individuals have been given preferential conditions for their PRC IIT assessment;
  • New "Six-year" rule aims to attract more foreign companies and foreign individuals to invest and work in China;
  • Non-domiciled individuals' tax calculations will become more complicated than previously due to different calculation formulas to be applied;
  • The rules on the tax treatment on non-domiciled individuals' annual bonus and equity based incentive income are now clearly stipulated.

Our recommendations

  • Withholding agents and non-domiciled individuals should be familiar with the relevant tax treatment so they can fulfil tax filing obligations accurately and avoid potential non-compliance risks;
  • Companies/non-domiciled individuals should consider advanced tax planning with respect to the PRC IIT taxation;
  • To closely follow further updates regarding the tax filing system as well as local practice and take relevant actions accordingly.

BDO China International Tax Service team is experienced in handling the relevant IIT matters and providing professional IIT advisory for both foreign and Chinese individuals.

For further information in relation to above topic, please do not hesitate to contact us.

Gordon Gao
[email protected]  

Rebecca Chen
[email protected]