UK China Tax Treay

Simon Misiewicz

Simon Misiewicz

Expat & Property Tax Specialist

1st June 2022

UK China double taxation Agreement

Chinese moving to the United Kingdom or British moving to China need to be aware of the UK China double taxation Agreement to prevent being over-taxed on their income and capital gains.

The UK-China double taxation treaty is a vital Agreement for ex-pats to understand the tax rate in China and how it impacts their UK tax affairs.

The UK-China tax treaty can prevent Brits from being taxed twice.

What are the basics of the UK China double taxation Agreement?

The UK China double taxation Agreement entered into force on 13 December 2013.

It enables Brits to claim a treaty exemption that reduces or prevents the taxation of income from dependent personal services, pensions, annuities, social security and other public pensions.

Residents in China are generally subject to individual income tax (IIT) on their worldwide income.

Non-residents are usually taxed in China on their China-sourced income only.

Double taxation treaties such as the UK China double taxation Agreement are created between two countries which define the tax rules when it comes to a tax resident of both countries.

Double taxation treaties can be complex but are created to ensure that an individual can claim tax relief instead of paying tax on the same income in two different jurisdictions.

Each double taxation treaty is different, although many follow similar outlines.

It is recommended that ex-pats review the UK-China tax treaties in full.

Can I emigrate to China from the UK?

Whilst anyone can visit China for a short period, not everyone can get permanent residency.

To be eligible to emigrate to China, you must meet at least one of the following conditions:

* Should have been married to a Chinese citizen or an immigrant with permanent residency for at least five years.

* Should have lived in China for at least nine months each of those five years.

* Should have made a direct investment in certain sectors of the Chinese economy for a minimum of three consecutive years.

* Should have a full-time job as the associate director, assistant general manager, assistant researcher, factory director or higher.

* Should have made an outstanding contribution to China.

* Should be an unmarried child below the age of 18 with parents who are Chinese.

* Should be above the age of 60 with relatives only in China, with no criminal record, financially stable, have secured a place to live in China and be in good health.

Permanent residence status is only granted to those with Chinese spouses who have worked in China for at least four years and foreign investors with a presence in China for at least three years.

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Are income tax rates higher in the UK or China?

The tax rate in China is divided into seven levels according to the amount of taxable income of an individual’s monthly salary.

The lowest level is 3% ranging up to 45%.

Chinese income tax rate is higher than the US rate of 37%. The Chinese income tax rate is lower than the Japanese rate of 56%, and about the same as the top rate in the UK.

Foreign individuals who reside in China for 183 days or more in a tax year but not more than six consecutive years will be subject to tax on their China-sourced and foreign-source income.


Can a foreigner buy real estate in China?

Foreigners can purchase real estate investments in China.

The essential requirement is that you have studied or worked in China for at least one year on a residence permit.

Foreigners are allowed to own one residential home.

There are additional requirements by province and city.

For example, in Beijing, you must pay taxes and social security for at least five years before being allowed to buy a house.

How do I obtain residency in China?

Individuals who have a domicile in China, or have resided in China for 183 days or more within a tax year, are deemed, residents.

In general, income derived by resident individuals from China and overseas will be subject to IIT in China.

There is also a Six-Year Rule, meaning that a foreigner who is a China resident taxpayer for less than a continuous period of six years will only be taxed on their China-sourced income.

Individuals who do not have a domicile in China and have not resided in China, or individuals who do not have a domicile in China but have resided in China for less than 183 days within a tax year, will be deemed as non-resident individuals.

Income derived by non-resident individuals from China will be subject to individual income tax, which means they will only be taxed on China-sourced income and gains.

The Chinese tax year is the same as the calendar year.

When am I liable to pay tax in China?

China does not adopt the Statutory Residence Test applied in the UK for tax purposes.

There is a straightforward process under the IIT law in China based on the number of days or the domicile status.

Chinese citizens are tax residents by default.

Foreigners in China are defined based on the number of days they stayed in the tax year to whether the individual has a domicile in China to determine their tax status.

Foreigners in China without a domicile will estimate the number of days in China to determine their tax status for the IIT declaration purpose.

The tax bureau adopts post-inspection and can check the entry records of ex-pats to determine tax status.

The UK-China double taxation treaty has specific clauses to eliminate the risk of employees being taxed twice in China and the UK.

The IIT Law was amended in 2018 and took effect from January 2019, with a progressive tax system based on income.

If a foreigner has been paying IIT in China, they can provide a tax declaration to HMRC.

If the amount of IIT paid in China is higher or the same compared to the amount an employee would have been paid in the UK on the same income, then it can be claimed against their UK tax liability.

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