Foreign nationals working in the PRC with a monthly employment income exceeding RMB4,000 (RMB3,500 for local Chinese employees as from 1st Sept 2011, RMB5,000 for both Chinese and foreign employees as from 1st Oct 2018) shall pay IIT at progressive rates. Employees from Hong Kong , Macau and Taiwan are also subject to the same tax rules as applied to foreign nationals. See table for the income tax rates and brackets.

The 183-day rule


The change that has been made in 2018


The 2018 amendments to the PRC Individual Income Tax Law, effective as from 1st Jan 2019, do not affect the 183-day rule, which shall continue to be applicable in determining the number of days an individual stays in China who works under an employment contract with his/her employer situated outside China.


However, the 2018 amendments have changed the definition for an individual employee to become a PRC tax resident. If the 183-day threshold is exceeded, the individual will become a PRC tax resident, and thus is liable to tax on worldwide income.


Tax exemption 


The tax exemption rule is applicable to employees who are resident in a PRC-treaty country. If the employee stays in the PRC for a period not exceeding 183 days in a calendar year, the employee will not be subject to income tax subject to the conditions set out below being satisfied: (a) the salary is not paid or borne by any source inside the PRC; and (b) the salary is not paid by any entity inside the PRC.

Where an employee works in the PRC for a period exceeding 183 days, his/her salaries will become taxable in whole in China, irrespective of where the income is paid or payable.


The PRC IIT law, as amended in 2018, has provided that the 5-year tax exemption period during which the foreign national or individual employee shall receive tax exemption treatment on non-PRC source income if it is received outside China and not paid by a resident company in China shall continue to be applicable.


90-day rule


The 183-day rule is used to determine whether the said income is taxable in the PRC. The tax exemption period for foreign nationals who are residents of a non-PRC treaty country will be shortened to 90 days in a calendar year.


Determination of the number of days an employee stays in China


In respect of the employee having no permanent home in China, in counting the days of staying in China, the day of and arrival and departure is respectively counted as one day, in accordance with the provisions in double tax agreement (or arrangement) that China has signed with other jurisdictions.  See Article 1 of notice [2004 97 issued by the State Administration of Taxation.


In respect of the employee having no permanent home in China, given that the employee who has either taken up dual positions in the PRC companies and non-PRC resident company or just taken up a position in non-PRC resident countries (foreign countries), and who visits China and leaves China on the same day, the number of days of stay is counted as half a day. See Article 2 of notice [2004] 97 of the State Administration of Taxation.


For details, please refer to Notice [2004] 97, issued by the State Administration of Taxation (Chinese version) [here].


The 365-day Rule (appealed as from 1st January 2019)


A PRC-domiciled individual is a tax resident for PRC Individual Income Tax Law purpose. A non-PRC domiciled individual who physically stays and works in the PRC for 365 days in a calendar year is regarded as a tax resident in the PRC as well. The 365-day rule is used to determine whether a person is a tax resident or non-tax resident. A tax resident is subject to tax on worldwide income.


Resident employee is subject to tax on all of his/her employment income derived from employment inside and outside the PRC. No count is taken of any "temporary absence" in calculating the number of days under the 365-day rule.

Temporary absence is a legal term, which is interpreted in a different way from the normal daily usage. The threshold for temporary absence is 30 days for a continuous absence in the tax year; or a total of 90 days in the calendar year if the absence is not continuous. The law here deems the employee to stay inside the PRC national boundary in spite of the fact that the employee is physically absent in the PRC during the said period of temporary absence.


Illustrated Example

Peter, who is an employee of a Hong Kong company, is required to work as the marketing manager in the Shanghai subsidiary of a Hong Kong Co. The monthly remuneration package including allowances is as follows: Peter will receive HK$50,000 per month. HK$30,000 is payable by Hong Kong , and RMB equivalent to HK$20,000 is payable by Shanghai . The position of his income tax will be as below.

The amount of HK$20,000 is taxable as it is borne by a source in the PRC. The amount of $30,000 paid by Hong Kong will be liable to tax in the following ways.

Question Scenario one - tax resident Scenario two - non-tax resident

Is Peter a tax resident or non-resident?

Peter is a tax resident if he is continually absent from the PRC for 30 days or less or absent for a total of 90 days or less in a calendar year. Peter is a non-tax resident if he is absent from the PRC for more than 30 days continuously or for a period exceeding a total of 90 days in a calendar year.
What is the PRC income tax liability? The whole amount of $30,000 paid by the Hong Kong company will be taxable.

(a) If Peter works for less than 183 days in a 12-month period, the $30,000 will be exempted from tax.

(b) If he works for 183 days or more, the $30,000, converted into RMB will be liable to tax in proportion to the number of days he stays in the PRC. .

Double Tax Problem 

Hong Kong tax

Peter will also be required to report his Hong Kong income to the Inland Revenue Department. If Peter could produce evidence of tax paid in the PRC, he is exempted from Hong Kong salary tax. As a separate but related matter, if the employer pays PRC income tax for Peter, the amount of tax paid will be taxable in Hong Kong .

PRC Income Tax Rates and Brackets (In RMB): *

  Tax borne by employee Tax borne by employer Tax rate

Quick deduction

Less than 500 Less than 475 5% 0
501 - 2,000 476 - 1,825 10% 25
2,001 - 5,000 1,826 - 4,375 15% 125
5,001 - 20,000 4,376 - 16,375 20% 375
20,001 - 40,000 16,376 - 31,375 25% 1,375
40,000 - 60,000 31,376 - 45,375 30% 3,375
60,001 - 80,000 48,376 - 58,375 35% 6,375
80,001 - 100,000 58,376 - 70,375 40% 10,375
Over 100,000 Over 70,375 45% 15,375

* Note : the income brackets have been changed since 1st Sept 2011. Please refer to the change in the IIT law at other page. [Read]