In China's tax law, the concepts of residents and non-residents are the basis for personal income tax collection, which directly affects the taxpayer's tax obligations and scope.
1. Definition of residents and non-residents
Resident individual: Generally refers to a person who has a residence in China, or a person who does not have a residence but has lived in China for a total of 183 days in a year.
Non-resident individual: refers to a person who does not meet the conditions of a resident individual.
Notice:
Residence: refers to the actual place of residence of an individual, which usually includes the place where spouse and minor children live together.
Residence: refers to the behavior of an individual living in a certain place continuously or cumulatively for a certain period of time.
The meaning of residents and non-residents
Differences in tax liability:
Resident individuals: They must pay personal income tax in accordance with regulations on their income from sources within and outside China.
Non-resident individuals: Generally only pay personal income tax on their income sourced in China.
Differences in tax rates:
The tax rates applicable to resident individuals and non-resident individuals may be different for different types of income.
Differences in preferential policies for exemptions and reductions:
The tax incentives enjoyed by resident individuals and non-resident individuals may be different.
2. Why distinguish between residents and non-residents?
Tax source jurisdiction: Each country has the right to levy global income tax on its residents, while non-residents usually only levy income from their own country.
Preventing double taxation: By distinguishing between residents and non-residents, you can avoid double taxation in two countries on the same income.
Promote international tax cooperation: Countries reach consensus on the definition and tax treatment of residents and non-residents by signing tax treaties to promote international tax cooperation.
Factors Affecting Resident Identification
Actual place of residence: The time and place where an individual actually lives is the most important factor in determining resident status.
Family relations: The residence of spouse and minor children will also affect the determination of individual resident status.
Workplace: Workplace is an important reference factor in determining where an individual actually lives.
Personal Will: An individual’s subjective will will also affect the identification of resident status to a certain extent.
for example
International students: Generally speaking, foreign students who come to China to study are non-residents and only pay personal income tax on their income from China.
Foreign experts: If a foreign expert works and resides in China for one year, he or she will generally be recognized as a resident and will need to pay personal income tax on his or her global income.
Executives of multinational companies: If executives of multinational companies work and live in China for a certain period of time, they may be deemed to be residents and need to pay personal income tax on their global income.
3. Summary
The distinction between residents and non-residents is the basis for the collection of personal income tax. It is of great significance for taxpayers to accurately determine their resident status and choose the appropriate tax payment method.
4. The legal basis for “residents” and “non-residents” in Chinese tax law
Determining a person's tax resident status is the basis for collecting personal income tax. Its legal basis mainly comes from the following aspects:
1. "Individual Income Tax Law of the People's Republic of China"
Basic principles: This law clearly stipulates the basic concepts of resident individuals and non-resident individuals, and makes detailed provisions on their tax obligations, tax rates, etc.
183-day rule: The law clearly stipulates that individuals who reside in China for a total of 183 days within a year are generally regarded as resident individuals.
The concept of residence: The law defines the concept of “residence” and provides a basis for determining the status of residents.
2. Relevant regulations of the State Administration of Taxation
Specific details: The State Administration of Taxation will issue a series of implementation rules and explanations in accordance with the provisions of the Personal Income Tax Law to define the concepts of "residents" and "non-residents" in more detail, and to make specific provisions for some special circumstances. .
Case guidance: The State Administration of Taxation will also publish some cases to answer questions encountered in actual operations and provide taxpayers with a reference.
3. Tax treaties
International practice: China has signed tax treaties with many countries. These agreements usually have more detailed provisions on the concept of residents, aiming to avoid double taxation and promote international tax cooperation.
Priority of application: When there is a conflict between domestic law and a tax treaty, the provisions of the tax treaty usually take precedence.
Other factors affecting resident status determination:
In addition to the above legal basis, the following factors will also affect the determination of resident status:
The individual's subjective wishes: Whether the individual intends to live in China for a long time, as well as his or her social relations in China, etc., may become reference factors in determining resident status.
Objective facts: Objective facts such as an individual’s actual residence in China, property status, family relationships, etc. are also important basis for judging resident status.
Summarize:
Determining a person's tax residency status is a comprehensive judgment process. When making determinations, the tax authorities will comprehensively consider the above factors and make judgments based on specific circumstances.
