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Tax impact of a US citizen working in China
Oct 24, 2009 23:54
  • GEARBOX
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I will be setting up a branch office in China next year and have the option of taking my salery in the US or China. I assume I will be in the highest bracket which I believe to be 42% in China. Question I would have is if I recieved pay in the US and then transferred money to me in China for rent and personal expenses, will I be exposed to China taxes as well in addition to US taxes paid? And should I take my salary in China, will I have to pay US taxes when I bring the money back home? Or is there an offset, where you pay the difference to the higher of the two jurisdictions such as when you live in New Jersey and work in New York? What would be the best solution? Thanks
Oct 26, 2009 06:01
#1  
  • SALSAFONDER
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About your questions, i can give you anwser accordingly.

1) you do not need to pay tax for your rent and personal expenses occured in China,

2) There are some regulations about if you have to pay income tax in China or not.
Remuneration derived by a resident of a contracting state in respect of an employment exerised in the other contracting state should be taxable only in the first mentioned contracting state, if:
a) the recipient is present in that other contracting state for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned and:
b) the remuneration is paid by, on the behalf of, an employee who is not a resident of that other contracting state, and;
c) the remuneration is not borne by a permament establishment or a fixed base which the employer has in that other contracting state.

3) If you pay personal income tax in China, i can give you a formular to calculate actual tax you have to pay.

Where is employer is responsible for the IIT reliability

Net Income – Monthly Deduction – Quick Deduction
IIT = (Gross Taxable Income – Monthly Deduction) x Tax rate – Quick Deduction

When calculating taxable income for IIT purposes, a monthly
deduction of RMB4,800 is available to expatriates.
Oct 27, 2009 05:44
#2  
GUEST83243 Dear Gearbox:

Have you checked with your local accountant? I believe that there is a tax break for Americans working and staying overseas but the catch is that your stay in US for the year cannot exceed 30 days in total. I had encountered a problem a couple of months back when I tried to convert RMBs to US Dollars(please note that each province is different) in Shandong province, foreigners are NOT allowed to convert RMB to any foreign currencies. The banking system here is totally different than what we are used to.

Good Luck,
Jo.
Oct 27, 2009 23:34
#3  
  • FREESPIRIT
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I don't know about China, but Taxes are still voluntary for the United States (which is a foreign corporation). Although if you claim to be a US citizen then you are considered to be their chattel or slave. Personally I adhere to to the American concepts of self governing and freedom from being imposed upon but to each their own choice. all powers reserved, Colin
Nov 1, 2009 04:17
#4  
  • PYGRANT
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Are you a citizen of the US or China? If a citizen of China, you will have to pay taxes on your earnings whether the money is paid to you in the US or China. If a citizen of the US, you are still liable for taxes: However, if you are out of the US for 330 of the 365 days of the year, you qualify for the foreign income exclusion. That means that for this tax year (2009) you can exclude aprox. $90,000 from federal taxation (the amount is really $89,000 and some dollars, and is adjusted by the IRS annually b/c of inflation). Therefore, your best bet is to be paid in the US in US dollars, and transfer the money to a bank in China for your living expenses. If your income will be substantially more than $90,000, I would suggest that you get part of it paid as a housing expense, as there is also a foreign housing expense exclusion. Most states, b/c they begin with the federal AGI, will also exclude the same amount from income taxation. It's a little more complicated than that, but not substantially so (Turbo Tax allows you to use these exclusions). You can probably do your taxes yourself, but if that's intimidating, consult a tax attorney who does this stuff for a living. If you are in the US for more than 330 days, all of your income is subject to taxation. Send me a message if you need any more info.
Nov 10, 2009 05:58
#5  
GUESTDAVE I am an American with an opportunity to work in China for the next 4 years. My salary would be $11800/month. So how much of that would I actually get after taxes?
Apr 14, 2010 15:23
#6  
GUEST34187 I work for an american company and work in HK I am paid in dollars deposited to my american account which I transfer to a Hong Kong acct. I make less than 50,000USD> I started my job in AUgust 2009. How am I taxed for the 2009 Can I deduct for moving xpenses and rent as I was not reimbursed from my company for that .

How does one deal with part of the year, since I stated August 2009 and still working there.
Apr 23, 2010 23:48
#7  
GUEST67195 If you are out of the US for 330 of the 365 days of the year (from April to April). Do you qualify for the foreign income exclusion - aprox.$90,000 from federal taxation?
May 5, 2010 02:54
#8  
  • LAWYERZHANG
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Just to add a few key points to the Individual income tax (hereinafter as "IIT") issue on question.

Where to pay.
Normally it's not a question up to your choice, but controlled by legal regulation(at least in China). The tax policy or treatment is mainly subject to your employment status:
1) if you do hold a position in a Chinese legal enterprise, you'll have to pay the IIT in China from the actual starting day of your employment.
2) if you do hold 2 posts concurrently for the same period (one in china and one abroad), you'll have to pay the IIT in China for the physical day you actually spent in China. In such cases, you could only come to china with a business visa.
3) If you're sent to China on an extended business trip, the IIT policy will varify if the total duration you spent in china within 1 calender year is over 183 days or not. over 183 day, to pay IIT for the whole year in China, any taxation paid already in the US or somewhere for the same period can be deducted accordingly.

Notes:
the deduction should not be more than the acutal taxation amount pursuant to chinese legal regulations. (i.e.:you're paid 5000 in the US as taxation, while you only have to pay 3000 pursuant to chinese regulations for the same taxed amount, only 3000 can be deducted. the rest 2000 can be deducted in no more than 5 years thereafter, if you continue to pay tax in China.
May 6, 2010 23:31
#9  
GUESTST I'm an American citizen who will be taking up a job in China in 2010. My salary will be 68k RMB per month.

I know that: I still have to pay my 2010 US taxes because I have been in the US for > 30 days in 2010.

Do I continue to have to pay my US taxes in 2011? I will not be in the US > 30 days in 2011.
Nov 29, 2010 09:57
#10  
GUEST21149 Do I have to pay Social Security taxes on the money earned in China? If so do I have to do the matching? I was in China for a total of 90 days, working for 66. Home for 12 of those 90 days.
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