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Foreign individuals working in China may apply for time apportionment filing basis if the following conditions are met:
- Concurrently holding a position with an entity outside China while on China assignment / employment;
- Required to spend substantial amount of their time outside China for performing their non-China related duties (the requirement may vary among localities; some local tax bureaus may use 90 days during a calendar year as a benchmark); and
- Their remuneration cost relating to the non-China duties would not be borne by any China entity.
It should be noted that what is being apportioned is not the income but the tax payable. In other words, the total employment income should be reported while the tax payable can be prorated based on the number of days physically spent in China. Depending on the situations, different formula on time apportionment filing basis can be adopted.
It should also be noted that time apportionment filing basis does not apply to bonus. If a foreign individual works for a foreign company with added-on duty for a China entity and receives a lump sum bonus, the portion related to a month with no China day would be considered as non-China sourced and would not be subject to China tax. However, if the portion of the bonus relates to a month during which the foreign individual has even one day spent in China, the entire portion of the bonus relating to that month would be subject to China tax even though the bonus is paid outside China.
We would be pleased to assist our clients in the following areas:
- Evaluating the possibility of applying for time apportionment filing basis
- Reviewing the documentation to substantiate the time apportionment claim
- Advising if there is any local requirement / practice for making such claim
- Handling the China tax compliance in relation to the time apportionment filing basis
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