Income Tax Regulations extend 5-Year Rule to 6-Year Rule, among other significant changes

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On December 13 and 22, 2018, the State Council and the State Administration of Taxation published a number of regulations regarding the reformed Individual Income Tax Law, which went into full effect on January 1, 2019.

Where do final regulations differ from the drafts published before?

Several adjustments were made compared to the draft version published earlier last year. Below we outline the most important changes in the final regulations.


During a transitional period of three years, foreign taxpayers can choose whether they wish to continue to benefit from the tax exemptions for rent, relocation, school fees, etc., which already applied to foreigners under the old law, or from the special deductions under the new income tax law.

From the tax year 2022, only the special deduction regulation in accordance with the reformed Individual Income Tax Law will be applicable to foreigners.

New tax withholding and prepay method

Different rules and regulations apply to the prepayment of taxes for resident and non-resident taxpayers. Further, the new tax rates as published before will be applied to salaries and wages, but existing tax rates will be applied to other types of comprehensive income, as summarized in the table below.

It is not clear yet how to withhold tax for foreign individuals at the beginning of the year when tax residency is not clear and how to change the withholding method when a tax payer’s status changes from non-resident to resident in the middle of the year.

Five-year rule to six-year rule

According to Article 4 of Guoling [2018] No. 707, a non-China domiciled individual, who stays in China for less than six consecutive years (and more than 183 days in each year), could be exempted from paying tax on the foreign sourced income which is borne by a foreign entity. Such income should be declared to the tax authority in charge. If the individual stays outside of China for more than 30 days in one calendar year, the clock will be set to zero and the six-year rule will start from the next year when he is in China for more than 183 days.

With this, the five-year rule has effectively been extended to a six-year rule.

In-depth coverage

We will cover all the regulations and their implementation in more detail in dedicated articles.


Richard Hoffmann

Richard Hoffmann, ECOVIS Beijing

Richard Hoffmann is a partner at Ecovis Beijing China. Richard obtained an honors degree in law and worked in Germany, the United States, and China for various prestigious law firms prior to joining Ecovis. In addition to being a member of the board of Ecovis International, he is Supervisor for the China business of several respected German companies and shares his extensive knowledge to students by teaching commercial law in China at SRH Hochschule Heidelberg. He has published more than fifty articles in international magazines, frequently speaks at high profile events in China and abroad and is often invited as a legal expert by international TV stations. Contact:

Ecovis Beijing

Ecovis Beijing is the trusted tax and legal advisor to several embassies and official institutions in China. It specializes in mid-sized international companies and is focused on tax & legal advisory, accounting and auditing. If you’re interested in finding out more about tax and legal, don’t hesitate to sign up for our Newsletter, give us a call +86 10-65616609 or contact us directly via