Living as an Expat in China
China’s essential role in the global market makes it a common home for Americans living and working abroad. But what are China’s taxes like for US expats? Let’s take a look.
Chinese Taxes at a Glance
- Primary Tax Forms:
- Date Form Is Received: March 1 (for annual returns)
- Tax Deadline: Monthly returns are due on the 15th of the following month; annual returns are due by June 30 for those required to file
- Currency: Renminbi/Yuan (CNY)
- Population: 1.4 billion
- Number of US Expats in China: Around 75,000
- Capital City: Beijing
- Primary Language: Mandarin (Standard Chinese)
- Tax Treaty: Yes
- Totalization Agreement: No
What Are China’s Taxes like for US Expats?
First things first: do US expats living in China have to file taxes with the Chinese government at all? In most cases, the answer is yes. (You’ll still have to file a US annual tax return, too.)
Unfortunately, China’s tax policies are remarkably complex. Many Americans living abroad in China are baffled by the complicated and ever-changing rules of Chinese expat taxation.
To help clarify your potential tax obligations, here’s a rundown of how China’s taxes impact US expats.
Who Has to File Taxes in China?
In China, taxation is based on residency status. Expats who are considered tax residents of China for at least five years are taxed on their worldwide income, while non-residents and those who have been residents for less than five years are only taxed on their China-sourced income.
Residents who only receive traditional employment income from a single Chinese employer will have their taxes withheld on a monthly basis. Residents whose income is not withheld will need to file their own taxes each month, and some may also have to file an annual reconciliation tax return. This includes residents who:
- Earn more than 120,000 yuan (CNY) in a single year
- Have more than one income source
- Have any foreign-sourced income
Non-residents will only need to file if they meet certain income thresholds.
As a foreign national, you are required to register with the State Administration of Taxation (SAT) as soon as you are eligible for taxation in China.
Who Qualifies as a Tax Resident in China?
China has one of the most intricate tax residency policies in the world. But as a general rule, expats are considered residents of China if:
- They have a domicile in China
- They spend at least 183 days in China in a given year, with or without a Chinese domicile
If you don’t meet these standards, you will typically be considered a non-resident for tax purposes.
What Types of Taxation Does China Have?
Categories of income subject to taxation in China include:
- Employment income
- Pay for labor or personal services
- Author’s income
- Business income
- Interest, dividends, and profit distribution
- Rental income
- Property transfer income
- Contingency income
Most forms of income are taxed monthly at progressive rates ranging from 3%–45%. To calculate the tax liability in these instances, simply multiply your income by the tax rate percentage, and if applicable, subtract the quick deduction.
Below, you can see Chinese income tax rates for 2021. (Note that there is a monthly standard deduction of 5,000 CNY for foreign nationals.)
2021 Chinese Income Tax Rate for Residents
|Annual Taxable Income||Rate Applicable to Income Level (%)|
|0 – 36,000||3%|
|36,000 – 144,000||10%|
|144,000 – 300,000||20%|
|300,000 – 420,000||25%|
|420,000 – 660,000||30%|
|660,000 – 960,000||35%|
|960,000 and above||45%|
2021 Chinese Income Tax Rate for Non-Residents
|Annual Taxable Income in CNY||Annual Taxable Income in CNY Rate Applicable to Income Level (%)|
|0 – 3,000||3%|
|3,000 – 12,000||10%|
|12,000 – 25,000||20%|
|25,000 – 35,000||25%|
|5,000 – 55,000||30%|
|55,000 – 80,000||35%|
|80,000 and above||45%|
2021 Chinese Income Tax Rate for Businesses
|Annual Taxable Income in CNY||Rate Applicable to Income Level (%)|
|0 – 30,000||5%|
|00 – 90,000||10%|
|90,000 – 300,000||20%|
|300,000 – 500,000||30%|
|500,000 and above||35%|
Pro Tip: Filing a joint return isn’t allowed in China. Spouses are assessed separately in all cases.
Capital Gains Tax in China
In China, capital gains that come from property sales (net of expenses and taxes) are taxed at a flat rate of 20%, and losses are not deductible. However, gains made from the sale of a sole private property are typically tax-exempt, as long as you have lived in that residence for five years or more.
China does not levy estate, inheritance, or gift taxes.
China’s consumption tax applies to luxury goods, such as:
The rate for this tax is computed based on the price of the goods.
The deed tax covers the purchase, sale, gifting, or exchange of ownership of land use rights and real properties. The rate ranges from 3%–5% of the amount involved in the exchange.
Land Appreciation Tax
China taxes any gain from the disposal of properties with a land appreciation tax ranging from 30%–60%.
Value-Added Tax (VAT)
Certain goods, services, and properties are subject to a value-added tax (VAT) in China. For example:
- Financial and consumer services are taxed at 6%
- Necessities like water and gas, transportation, construction services, telecommunication services, and postal services are taxed at 9%
- Sales and importation of goods, repairs, and leasing services are all taxed at 13%
A 3% educational surcharge is applied to the amount of China’s turnover taxes, such as the VAT and consumption tax.
While there is a US-China tax treaty, there is no US-China totalization agreement. And unfortunately, China requires foreign nationals to pay into their social security system. This means expats who live in China are at risk of double taxation in the form of paying into two social security programs while only receiving one benefit.
The rates vary depending on local rules and the jurisdiction in which you reside. Most jurisdictions will require that expats pay around 10%.
Does the US Have a Tax Treaty with China?
Yes, US and China have a tax treaty in place. This helps protect US expats from double taxation by clearly specifying which country should be paid certain taxes and when those taxes are due.
Pro Tip: You will need to register with the tax authorities of China to take advantage of any of the benefits of the US-China tax treaty.
However, there is no US-China totalization agreement, so Americans living abroad in China may still be subject to a form of double taxation in that regard.
What Tax Forms Do Americans Living in China Have to File?
As a US expat living abroad in China, you’ll probably have to file multiple tax forms with both the Chinese government and Uncle Sam. Here are some of the most common examples.
Chinese Tax Forms for Expats
Self-Declaration of Individual Income Tax
The primary tax form used in China is the Self-Declaration Form of Individual Income Tax. Expats who have to file their own taxes—instead of simply having their taxes withheld by their Chinese employer—will need to file and pay their taxes on a monthly basis. These taxes will be due on the 15th of each month.
Some expats will also need to file an annual reconciliation return. Tax residents must file their annual returns by June 30, while non-residents must file by January 15.
US Tax Forms for Expats
IRS Form 1040: Individual Income Tax Return
Form 1040 is the normal US individual income tax return. Virtually every US citizen is required to file this form, no matter where they live.
The standard due date for Form 1040 is April 15, but in the case of expats, that deadline is automatically extended to June 15. (You can also request a further extension to October 15.)
IRS Form 8938: Statement of Specified Foreign Financial Assets (FATCA)
As an expat, if you own non-US financial assets above certain thresholds, you must file a FATCA report. The specific threshold for your finances will depend on your filing status and whether you qualify as a bona fide resident of China.
If you are required to file a FATCA report, attach it to your Form 1040 once you’ve completed it and file them together.
FinCEN Form 114: Report of Foreign Bank and Financial Accounts (FBAR)
If you have a total of at least $10,000 in a non-US bank account, you’ll have to report it by filing FinCEN Form 114, better known as FBAR. (This applies whether the money is in a single account or spread out over multiple.)
You should file the FBAR electronically using the FinCEN BSA E-Filing System. The standard due date for the FBAR is April 15, but if you miss that deadline, there’s an automatic extension until October 15.
What Tax Deductions Are Available for Expats Living in China?
Because of the US-China tax treaty, most Americans living in China are already exempt from double taxation. However, the IRS also provides several other potential tax credits and deductions for expats, such as:
- Foreign Earned Income Exclusion
- Foreign Tax Credit
- Foreign Housing Exclusion (or Deduction)
Most expats who use these tax credits can erase their US tax debt entirely.
Do You Need Help with Your Expat Taxes?
We hope this guide has given you a better understanding of how China’s tax policies affect US expats. But if you still have questions, we can lend a hand.
At Greenback Expat Tax Services, we specialize in helping expats manage their tax obligations. Just reach out to us, and we’ll be happy to help you file your expat taxes accurately and on time.