New IIT Law: Will it lead to an Exodus of Foreign Executives working in China?

Tax Notes International looked at the new tax residency rules under the reformed Individual Income Tax (IIT) law and how they could affect expatriates working in China. The article looked in particular at the potential taxation of worldwide income and the consequences that would have on employees and employers alike. ECOVIS Beijing’s Elizabeth Shi pointed out that it would be difficult to predict whether the new law will result in an Exodus of Foreign Executives working in China. The full article is available for download here.   

The amended IIT law newly established the concept of tax residency, and in general declared home and abroad income tax-liable in China for tax residents. In the meantime, the Chinese government has indicated that it does not plan to tax overseas income of foreigners in China from the first year of tax residency onwards, one of the main concerns raised in the article by Tax Notes International.

Further regulation and implementation rules of the new IIT law have yet to be released and as the article points out, uncertainties remain regarding other current preferential treatment of foreign taxpayers, e.g. special provisions for annual bonuses.
For an overview of the information available so far, please refer to our article outlining the most important changes of the Individual Income Tax Reform. For continuous updates, please subscribe to our newsletter or check our website again. Where we will continue to post updates.