China's tax law stipulates that Chinese residents should include their foreign income in the scope of comprehensive income taxation and pay individual income tax at the applicable tax rate. Non-resident individuals shall pay individual income tax on their income obtained in China and their income in China obtained abroad. Individuals are required to declare their foreign income and pay taxes in accordance with the regulations, and can enjoy tax exemption or tax exemption in accordance with double taxation treaties or tax treaties. Therefore, a correct understanding of the definition and judgment criteria of foreign income is a prerequisite for compliance.
Overseas income refers to all kinds of income obtained by individuals outside China, including wages and salaries, author's remuneration, royalties, business income, interest dividends, rental income, income from property transfer, incidental income, etc. To determine whether an income is overseas, it is necessary to conduct a comprehensive analysis based on the individual's provision of labor services outside China, remuneration from overseas enterprises or organizations, overseas production and business activities, and overseas equity holdings.
The income from the provision of services provided by an individual outside China falls under the category of foreign income. For example, if a person is sent to work in Germany, the wages and salaries he receives while in Germany are considered foreign income. This type of income is characterized by activities that are directly related to the individual's work, appointment, employment or performance abroad.
The author's remuneration income received by an individual from an overseas enterprise or other organization is also an overseas income. For example, if an individual publishes academic research in an authoritative journal in the UK, the remuneration paid by the journal to the individual is foreign income. This type of income is characterized by a direct correlation with an individual's activities such as creation, performance, consulting and other activities abroad.
Royalties obtained by individuals from the use of concessions outside China are also overseas income. For example, if an individual holds a patented technology and allows his or her patent rights to be used in Canada, the royalties obtained are foreign income. The characteristics of this type of income are directly related to the individual's activities such as intellectual property rights and technology transfer abroad.
Income related to production and business activities obtained by individuals engaged in production and business activities outside China is also overseas income. For example, the business income obtained by an individual from business activities in the United States is foreign income. The characteristics of this type of income are directly related to the individual's overseas business, investment and other activities.
The interest, dividends and bonuses obtained by an individual from overseas enterprises, other organizations, and non-resident individuals are also foreign income. For example, if an individual holds shares in a Malaysian enterprise, the dividends and bonuses obtained from the enterprise are overseas income. The characteristics of this type of income are directly related to the individual's overseas investment, equity and other activities.
Income obtained from leasing property to a lessee for use outside China, transfer of immovable property located outside China, transfer of equity in an overseas enterprise, and incidental income paid by an overseas enterprise are also overseas income. The characteristics of these incomes are directly related to the activities of individuals such as leasing, property transfer, and investment income abroad.
It should be noted that if the fair value of the assets of the invested enterprise or other organization is more than 50% of the fair value of the assets of the invested enterprise or other organization at any point in time within 36 consecutive months before the transfer, and it is directly or indirectly derived from immovable property located in China, then the income from the transfer of the equity assets is the income from the transfer of the equity assets in China.
In short, the definition and characteristics of overseas income include the provision of labor services by an individual outside China, remuneration from overseas enterprises or organizations, overseas production and business activities, and overseas equity holdings. To determine whether an income is foreign, it is necessary to comprehensively consider the individual's activities and income** abroad, and refer to international practices and the provisions of relevant tax treaties.
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The author of this article is Mr., Chief Economist of Yishuitong mark