China Tax Obligations for Foreigners: 2026 Guide

Working or doing business in China? Understanding your tax obligations is essential. China's tax system for foreigners has undergone significant changes, and non-compliance can lead to serious consequences including exit bans.

Tax Residency Rules

Resident vs. Non-Resident

Your tax status depends on how long you stay in China:

• Non-resident: Less than 183 days in a calendar year - taxed only on China-sourced income
• Resident: 183 days or more - taxed on worldwide income (with exceptions)

The Six-Year Rule

Foreigners who are tax residents can still avoid worldwide taxation if:

• They haven't been resident for 6 consecutive years
• They leave China for more than 30 consecutive days in any year
• This "resets" the six-year clock

Individual Income Tax (IIT) Rates

China uses progressive tax rates for employment income:

• Up to ¥36,000: 3%
• ¥36,001 - ¥144,000: 10%
• ¥144,001 - ¥300,000: 20%
• ¥300,001 - ¥420,000: 25%
• ¥420,001 - ¥660,000: 30%
• ¥660,001 - ¥960,000: 35%
• Over ¥960,000: 45%

Taxable Income Types

• Salary and wages
• Bonuses and allowances
• Business income
• Rental income from China property
• Capital gains (certain types)
• Royalties and licensing fees

Deductions and Allowances

Standard Deduction

¥5,000 per month (¥60,000 annually) for all taxpayers.

Special Additional Deductions

• Children's education: ¥2,000/month per child
• Continuing education: ¥400/month
• Housing loan interest: ¥1,000/month
• Housing rent: ¥800-1,500/month (varies by city)
• Elderly care: up to ¥3,000/month
• Infant care (under 3): ¥2,000/month per child

Foreigner-Specific Benefits

Until December 31, 2027, foreigners can choose between:

• Special additional deductions (same as Chinese citizens), OR
• Tax-exempt benefits (housing, children's education, language training, etc.)

Filing Requirements

Monthly Withholding

Employers must withhold and remit IIT monthly. Most employees don't need to file separately.

Annual Reconciliation

Required if you:

• Have income from multiple sources
• Annual income exceeds ¥120,000
• Need to claim additional deductions
• Have tax underpaid or overpaid

Filing period: March 1 - June 30 of the following year.

Common Compliance Issues

• Unreported income: Freelance work, overseas income
• Incorrect residency status: Miscounting days in China
• Missing deadlines: Late filing penalties
• Improper deductions: Claiming ineligible expenses

Penalties for Non-Compliance

• Late payment interest: 0.05% per day
• Late filing penalty: up to ¥10,000
• Tax evasion: 50%-500% of unpaid tax, plus criminal liability
• Exit ban: May be imposed for significant tax debts

Leaving China Considerations

Before departing China permanently:

• Complete annual tax reconciliation
• Settle any outstanding tax obligations
• Obtain tax clearance if required
• Keep records for potential future audits