How do you determine tax on the salary gained by non-resident individuals in China who hold a position in a Chinese company or foreign company's permanent establishment in China?
A foreign resident who is employed to work in China normally will be subject to Chinese taxation on the wages, salaries, and other remuneration only if he is present in China for an aggregate of more than 183 days in the relevant year. But if the remuneration is paid by a Chinese resident, or if the remuneration is borne by a foreign employer's permanent establishment in China, this salary will be treated as income originating from China and be subject to Chinese tax rules. The salary originating from China shall be considered as salary gained by the individual during the period of actual work within China, no matter if it is from an enterprise inside or outside China. Meanwhile, the salaries gained during the work outside China, which are paid by an enterprise either inside or outside China, belong to income originating from outside China.
The treaties also clarify the tax treatment of other types of individual income. For example, a director's salary derived by a foreign resident as a member of the board of directors of a company established in China, may be taxed in China. An entertainer or athlete will be subject to Chinese tax when he performs his activities in China, unless the activities are performed pursuant to an official cultural exchange program. Tax treaties also provide some tax exemption for foreign teachers, students and trainees who meet with certain conditions.
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