Recently, the Ministry of Finance ("MOF") and the State Taxation Administration ("STA") have jointly issued the Announcement on the Individual Income Tax Policy for Foreign-sourced Income (the "Announcement") which is applicable to the handling of related tax affairs for the year 2019 and thereafter.
According to the Announcement, nine types of income, including "income derived from the provision of labor services outside the territory of China, such as holding a post, being employed or performing duties", will be considered income from outside the territory of China. A resident individual shall, pursuant to the provisions of the Law on Individual Income Tax and the implementing regulations thereof, calculate the amount of payable individual income tax (IIT) on his or her domestic income and foreign-sourced income obtained in the current tax period, in three circumstances. For example, the general income obtained by a resident individual from outside the territory of China should be consolidated with his or her domestic-sourced general income for the purpose of calculating the tax payable. Meanwhile, the Announcement states that for the income obtained by a resident individual from outside the territory of China within a single tax year, the amount of income tax that has been levied and paid outside the territory of China under the tax law of the country (region) which such income is sourced from, may be used to offset the amount of individual income tax payable by him or her for this tax year, to the extent of the offset quota. A resident individual that has obtained income from outside the territory of China shall file the tax return at any time between March 1 and June 30 of the year following the year when the income is obtained.