Declaration Standards for Resident and Non-resident Individuals
1、Definition of basic concepts
According to China's Individual Income Tax Law, individual status is divided into two categories according to residence status:
(1)
Individual Resident criteria:
Have a residence in China (refers to habitual residence in China due to household registration, family or economic interests) or have no residence but have lived in China for 183 days in a tax year (January 1 to December 31 of the Gregorian calendar).
(2)
Criteria for non-resident individuals:
Have no domiciliary and not reside in China or have no domiciliary and reside in China for less than 183 days in a tax year.
2、Tax obligations
(1)
Individual tax liability of residents: Personal income tax shall be paid on income obtained from within and outside China.
(2)
Tax liability of non-resident individual: Income tax shall be paid on income obtained within the territory of China.
(3)
Special Exemptions:
Non-resident individuals who have resided in China for no more than 90 days in total within a tax year are exempt from individual income tax on the portion of income derived from within China that is paid by an overseas employer and not borne by the employer's institutions or places of business within China. An individual without domicile in China who has resided in China for a total of 183 days in a consecutive year for less than six years shall, upon filing with the competent tax authorities, be exempted from individual income tax on the income derived from sources outside China and paid by units or individuals outside China.
3、Tax Calculation Method
(1)
Individual Residents:
Comprehensive income tax calculation: income from wages and salaries, income from labor service remuneration, income from manuscript remuneration and income from royalties (collectively referred to as comprehensive income) shall be combined for individual income tax calculation in the tax year. Calculation of taxable income: The tax payable shall be calculated at the individual income tax rate of comprehensive income based on the balance of the income of each tax year minus 60,000 yuan of expenses, special deductions, special additional deductions, other deductions determined according to law and eligible donations to public welfare and charitable undertakings.
(2)
Non-resident individuals:
Itemized taxation: Income from wages and salaries, income from labor service remuneration, income from manuscript remuneration and income from royalties shall be itemized monthly or by times. Calculation of taxable income: Income from wages and salaries: the taxable income amount is the balance of the monthly income after deducting the expenses of 5,000 yuan. Income from labor remuneration, manuscript remuneration and royalty income: The amount of each income shall be the taxable income amount.4、Identity Transformation and Tax Treatment
(1)
General principles:
When filing a tax return for the first time in a tax year, an individual without domiciliary shall reasonably estimate the number of days of residence in China and the number of days of residence stipulated in the tax agreement according to the contract and other circumstances and calculate the prepayment tax accordingly. If the actual living situation does not match the expected situation, it shall be handled according to the following provisions:
(2)
specific situation:
(a)
Process of residents change to non-residents （less than 183 days of residence） If the estimated number of annual residence days is less than 183 days but the actual limit is exceeded, it is required to report to the tax authority within 15 days from the date of not meeting the requirements. Recalculate the tax according to the non-resident status and pay the difference (no late payment penalty). If you overpay tax, you can apply for a refund.
(b)
Process of non-residents change to residents （living for more than 183 days）:
Expected non-residents but actual residence of 183 days and less than 6 consecutive years. The withholding method within the year is unchanged (monthly withholding), and the combined declaration is made according to the resident rules in the final settlement of the next year. If one leaves the country in the current year and does not re-enter, they can choose to complete the final settlement and payment before leaving.
(c)
Treatment of expected differences in residence days
An individual without a domicile is expected to reside in the country for no more than 90 days (or 183 days as stipulated in the tax treaty) but exceeds this number of days. Within 15 days after the end of the month to which the actual number of days belong, report to the in-charge tax authority, recalculate the tax payable amount of income from wages and salaries in the previous month and pay the tax (no late payment penalty).
The differentiated collection and administration of individual income tax for residents and non-residents in China not only reflects international practices but also considers fairness. Taxpayers need to pay attention to the change of residence status, comply with the declaration obligations, and especially ensure tax compliance through pre-judgment, adjustment and filing procedures when the status is changed. It is recommended to consult professional tax agencies in complex cases to optimize tax arrangements.
