The new “Individual Income Tax Law,” which came into effect in 2019, stipulates that an individual who is domiciled in China or who is not domiciled in China but has stayed in China for a cumulative period of 183 days in a tax year is resident. By the provisions of the Law, a resident individual shall pay individual income tax on his or her income obtained inside and outside China.
Meanwhile, according to “Regulation on the Implementation of the Individual Income Tax Law of the People’s Republic of China,” if the number of years in each of which an individual who does not have a residence in China has stayed for a total of 183 days or more in China is less than six years consecutively, he or she may, after filing a report with the competent tax authority, be exempt from individual income tax on his or her income derived from outside China and paid by overseas entities or individuals. Suppose the taxpayer had left China for 30 days or more in a single trip in any of the years they have stayed for a total of 183 days or more in China. In that case, the starting time of the specified consecutive years in each of which they have stayed for a total of 183 days or more in China should be recounted.
Since the year 2019 is the starting year for the “Six-year rule” according to the new “IIT Laws,” the first ‘Six-year rule” shall be applied if the individual who does not have a residence in China has stayed for more than 183 days and hadn’t left China for more than 30 days in a single trip each year during 2019 to 2024. In this case, if he or she stays in China for more than 183 days in the year 2025, he or she shall need to pay individual income tax on his or her income derived from outside China and delivered by overseas entities or individuals. Even if they leave China for over 30 days in a single trip in 2025, the “six years” can be recounted. However, they still need to pay individual income tax on their income derived from outside China and delivered by overseas entities or individuals if they stay for a total of 183 days or more in China in 2025.
To avoid paying individual income tax on income derived from outside China and delivered by overseas entities or individuals, an individual who does not have a residence in China has stayed for more than 183 days and hasn’t left China for more than 30 days in a single trip each year during 2019 to 2023, you may need to arrange a more than 30 days’ trip outside China in the year 2024.
