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Ⅰ. Foreign employees are eligible for tax exemptions according to the following conditions:
1. In a tax year (365 days), any foreign employee who lives in the territory of China for no more than 90 days, either continuously or accumulated in total;
2. In a tax year (365 days), any foreign employee whose country has concluded agreement on double taxation with the Chinese government, and who lives in the territory of China for no more than 183 days either continuously or accumulated in total;
3. Income that a foreign employee obtains within the territory of China shall be paid by its foreign employer. Such incomes shall not be derived from the employer’s branch within China.
Ⅱ. Conditions for personnel of embassies or consulates to be exempted from taxation:
In accordance with the relevant provisions of the Individual Income Tax Law and the Vienna Convention on Consular Relations, officials and other staff working in embassies or consulates shall be exempted from individual income tax. Incomes that are stipulated in international conventions or treaties acceded to by the Chinese government may also be applicable to tax exemption.
Ⅲ. Conditions for foreign experts’ wages or salaries to be exempted from taxation:
Foreign experts’ wages or salaries can be exempted from individual income tax with the involvement of any of the following circumstances:
a. Foreign experts who are sent to work in China by the World Bank directly， according to the World Bank Loan Agreement;
b. Experts who are sent to work in China by organizations of the United Nations directly;
c. Experts who are sent to work in China by the United Nations’ aid programs;
d. Experts sent by a donor country to China to specially work for the donor country’s voluntary aid programs;
e. Wages or salaries paid by their own government for experts of culture and education who are sent to China via culture exchange programs approved by both governments and have worked in China for no more than 2 years;
f. Wages or salaries paid by their own government for experts of culture and education who are sent to China by international exchange programs operated by Chinese universities or colleges and have worked in China for no more than 2 years;
g. Wages or salaries paid by their own government for experts who are sent to work in China by agreements reached between non-governmental organizations on scientific research.
Ⅳ. Conditions for medical insurance to be exempted from taxation:
1. Medical insurance, including dental insurance, shall be covered by foreign enterprises for their employees who come to work in China.
2. Tax authorities shall examine and verify the medical insurance to ensure its amount is reasonable and it is actually provided by the foreign enterprise’s welfare system.
Ⅴ. Conditions for foreign employees’ housing expenses to be exempted from taxation:
1. If foreign-funded enterprises or foreign institutions stationed in China buy or rent houses and provide them for free for their foreign employees to live in, the expenses shall not be counted into the taxable amount of income of their foreign employees’ salaries or wages.
2. If foreign-funded enterprises or foreign institutions stationed in China provide fixed-amount allowance for housing expenses for their foreign employees, this allowance shall be counted into their foreign employees’ wages or salaries. However, if foreign’ employees can submit receipts that accurately show the real housing expenses, the real cost can be deducted from the taxable amount of income.
Ⅵ. Conditions for foreign employees who come to work in China and foreign students studying in China to be exempted from taxation:
1. If the Chinese entity provides foreign experts of culture and education who come to work in China with accommodation, transportation and medical treatment for free, these expenses shall not be counted into their taxable amount of income for individual income tax.
2. Service staff, who are directly sent by their countries to support the development of China shall be exempted from individual tax for their wages or allowances, whether the payments are delivered by the Chinese entity or not.
3. Living allowance or scholarship obtained by foreign students studying in China shall be exempted from individual income tax.
4. For foreign employees who come to work in China, if they can clearly separate, within their “lump sum payment” delivered by the foreign companies, the wages, funds for business, and living allowance, they only need to pay individual income tax for their wages or salaries.
Ⅶ. Conditions for foreign employees’ allowance or subsidies to be exempted from taxation:
1. Reasonable housing allowance, food allowance and laundry fees can be exempted from individual income tax if these subsidies are obtained by foreign employees through reimbursement or in non-cash way.
2. When foreign employees begin or end their job in China, the expenses for relocating paid through reimbursement shall be exempted from individual income tax.
3. Reasonable allowance for business trips obtained by foreign employees can be exempted from individual income tax.
Ⅷ. Conditions for remittance by Chinese nationals residing abroad to be exempted from taxation:
1. Inward remittance by Chinese nationals residing abroad to support their family members residing in China shall be exempted from individual income tax.
2. Foreign exchanges remitted inward for inheritance purposes shall be exempted from individual income tax.
3. Foreign exchanges which once were frozen in the United States and have been retrieved back to China shall be exempted from individual income tax.
Ⅸ. Other items that can be exempted from taxation for foreign personnel:
1. Allowance obtained by foreign personnel for home visiting, learning language or educating children can be exempted from individual income tax if examined and approved by local tax authorities as reasonable.
2. Currently, dividends obtained by foreign employees from B shares or from the shares issued overseas by Chinese enterprises can be exempted from individual income tax. If foreign personnel obtain dividends from foreign funded enterprises, they also don’t need to pay individual income tax.
3. Currently, the income from transferring private shares between individuals is exempted from individual income tax, but the income foreign employees obtain between transferring shares of foreign-funded enterprises still needs to be taxed.
