Recently, the Ministry of Finance ("MOF") and the State Taxation Administration ("STA") have issued the Announcement on the Criteria for the Determination of the Length of Residence of Individuals Having No Place of Abode in China (the "Announcement") and the Announcement on the Individual Income Tax Policies for Non-resident Individuals and Resident Individuals Having No Place of Abode in China, both of which are retrospectively effective from January 1, 2019.
According to the Announcement, the latest Implementing Regulations of the Individual Income Tax Law retain the preferential institutional arrangement for tax exemption for foreign-sourced payments made by overseas payers, as provided in the previous regulations, and further relax the conditions for tax exemption. Specifically, first, the criterion for tax exemption for an alien who is not deemed as a resident taxpayer if he or she has lived in China for shorter than five years, is relaxed to depend on the residence of shorter than six consecutive years. Second, the length of consecutive residence will be recalculated for an alien as long as he or she leaves China for over 30 days one time in any year. Third, as for the administrative mode, the previous approval of competent tax authorities are superseded by the record-filing system, which streamlines the formalities. The Announcement on the Individual Income Tax Policies for Non-resident Individuals and Resident Individuals Having No Place of Abode in China provides clarity on the source of income, the calculation of the income of wages and salaries received by individuals having no place of abode in China, the calculation of tax payments of individuals having no place of abode in China, the applicable tax conventions, provisions for tax levies and administration, among others.