Introduction and Basics
Individual Income Tax in China is a complex subject and often misunderstood. Ask one expatriate, then ask another, and they’ll give you different opinions. However unfortunately, expatriates do not decide China’s tax regulations. Neither is the situation short of clarity in the eyes of China’s tax bureau, who are quite clear on the subject and who are progressively clamping down on abuse of non-working visas and the under-declaration of income by expatriates in China.
If relocating to China, you should do your homework well in advance to assess your personal tax situation with the related authorities and ensure you are in compliance – China’s tax authorities are increasingly targeting expatriates who evade or only partially declare their IIT, with painful consequences for them and the international companies who employ them if tax is found to have been under declared. China's individual income tax band is high compared to other countries (with a top band of 45%), so your employers may also need to put into practice tax equalization plans and assist expatriate personnel with their tax filings in both China and their home domicile.
However China is also reasonable in that it realizes expatriates have commitments abroad, such as mortgages, kids education and so on. Accordingly, expatriate personnel in China may have their salary part paid overseas and part paid in China - but if working here the full amount - regardless of where it is paid - must be declared to the tax authorities in China and the tax paid on this. So how much salary should be paid in China ?
There are no specifics on this, so the general principle of 'reasonableness' applies. A reasonable amount to receive in China would be the expatriates living costs, going out, meals, a few beers on a Saturday night. Not receiving any income in China is unreasonable and may lead to the tax authorities questioning your behavior - if you are not drawing any salary here then what are you living on ?
The implication is undeclared income from another source, and this can lead to problems with audit examinations both for you and your employer.
As for getting your salary paid to you in China back home if you do not spend it all here - provided you can show the tax paid receipts relating to that income, it is not a problem to have excess amounts of RMB salary converted to USD or pertinent currency and wired back home. You need to show the China tax paid receipts applicable to your China paid salary to the State Administration of Foreign Exchange (SAFE), they will provide permission to convert RMB to your designated currency for the affected amount, you then take this documentation to your China bankers who will follow your instructions and wire it to your specified account overseas.
