China's Residency Rules: Domiciled vs Non-Domiciled and the 6-Year Rule
China's IIT (Individual Income Tax) Law (2019 revision) establishes two residency categories: (1) Domiciled residents (有住所居民 — yǒu zhùsuǒ jūmín): Chinese nationals and foreigners who have a 'domicile' in China — defined as habitual residence due to household registration (hukou), family ties, or economic interests. Domiciled residents are taxed on worldwide income from day one of their presence in China. (2) Non-domiciled residents (无住所居民 — wú zhùsuǒ jūmín): foreigners and Chinese nationals whose 'domicile' is not in China (e.g., a Shanghai resident working in Beijing without a Beijing hukou). Non-domiciled residents are taxed on Chinese-source income from day one, but worldwide income only applies if they are in China for 183+ days in a calendar year AND for 6 consecutive years without a single absence exceeding 30 consecutive days. The 6-consecutive-year clock resets if the individual is absent from China for 30+ consecutive days in any single year. Practical planning: for foreigners living in China on extended assignments, an annual trip outside China of 30+ consecutive days resets the 6-year clock — preventing worldwide IIT liability. This is a widely known planning strategy. 2019 reform note: the previous 'five-year rule' was abolished — replaced by the 6-year framework. The reform also introduced comprehensive anti-avoidance provisions and mandatory reporting of overseas accounts (FATCA equivalent).
SAT Tax Clearance Certificate on Departure
The State Taxation Administration (STA, 国家税务总局) requires a tax clearance certificate (完税证明 — wán shuì zhèng míng) for certain departing taxpayers. Who needs tax clearance: (1) Foreigners leaving China who have outstanding IIT liabilities. (2) Chinese nationals with significant overseas assets or income who have been worldwide-taxed IIT residents. (3) Individuals who have been assessed for large tax liabilities and have not settled them. The tax clearance process: (1) Visit your local district tax bureau (税务局 — shuì wù jú) to request the certificate. (2) Bring: passport, Chinese tax registration documents, proof of income (pay stubs, employment contracts), and any outstanding tax payment receipts. (3) The bureau will review your filing history and confirm no outstanding IIT is owed. (4) A 完税证明 is issued confirming tax-clearance status. For most expatriates on employer-run IIT: the employer's payroll department handles the withholding and remittance — your personal clearance is typically straightforward. High-net-worth individuals: if you have undeclared overseas income during the 6-year worldwide tax period, clear this proactively before departure. China's international tax information exchange (CRS): China is a CRS signatory — overseas account information is received from 100+ jurisdictions. The STA can audit overseas income after departure.
Social Insurance (NSSF) for Departing Foreign Workers
China's social insurance system covers: pension insurance (养老保险), medical insurance (医疗保险), unemployment insurance (失业保险), work injury insurance (工伤保险), and maternity insurance (生育保险). Foreign workers in China: since 2011, foreign nationals employed by Chinese entities are required to participate in China's social insurance system (国务院令第 586 号 — State Council Decree No. 586). Contribution rates (employee share): pension 8%, medical 2%, unemployment 0.5% (rates vary by city). Total employer + employee contributions: approximately 30–40% of salary. Pension withdrawal for foreigners on departure: (1) If your home country has a bilateral social security totalization agreement with China: do not pay into both systems simultaneously; use the exemption under the agreement. China has bilateral agreements with Germany, South Korea, France, Japan, Denmark, Finland, Canada, the Netherlands, Switzerland, Spain, and Serbia among others. No China-USA totalization agreement. (2) If no bilateral agreement: foreign workers who permanently leave China and cancel their work permit can apply to withdraw their Chinese pension insurance individual account balance (个人账户 — gè rén zhànghù). The withdrawal is the employee contribution portion only (not the employer portion, which goes to the pooled fund). Application: via your local Human Resources and Social Security Bureau (人力资源和社会保障局). Required: passport, visa/work permit cancellation certificate, proof of departure. Chinese nationals: accrue pension credits toward the full retirement age (60 for men, 55 for women in professional work, 50 for women in other work). Contributions are fully portable within China; pension payable internationally at retirement.
Chinese IIT on Investment Income and Overseas Assets
China's IIT applies to the following income categories relevant to departing residents: (1) Wages and salaries (工资薪金所得): progressive rates 3%–45% on 7 taxable income bands. Annual comprehensive income: salaries, freelance income, royalties, and rental income combined and taxed at progressive rates. (2) Business income (经营所得): 5%–35% progressive. (3) Dividends from Chinese companies (利息、股息、红利): 20% flat rate. (4) Capital gains on Chinese equities: 20% flat (currently exempt for publicly traded A-shares — this exemption may change; verify current policy). (5) Rental income from Chinese property: 20% flat. (6) Capital gains on Chinese real estate: 20% flat (gains from property sales by individuals: complex local rules apply; varies by city and holding period). Overseas assets and income (for worldwide-taxed IIT residents): overseas dividends, interest, and capital gains must be declared in China on the annual IIT settlement (综合所得年度汇算清缴 — comprehensive income annual settlement). Filing deadline: March 1 to June 30 of the year following the tax year. Foreign tax credits (FTCs) available for taxes paid abroad on overseas income — limited to the Chinese IIT calculated on that income. Special additional deductions (专项附加扣除): child education, elder care, housing mortgage interest, rental housing, continuing education — all deductible from annual comprehensive income.
Hukou, Property, and Post-Departure Obligations in China
Hukou (户口) is China's household registration system — primarily a domestic Chinese administrative system for Chinese nationals, not directly applicable to foreign nationals. Chinese nationals departing permanently: hukou cancellation is not required for departure (unlike AIRE in Italy or commune deregistration in Belgium). However, maintaining or holding a hukou in China may affect your 'domicile' determination for IIT purposes — review with a Chinese tax advisor if you intend to have no further Chinese IIT obligations. Chinese property as a non-resident: (1) Annual property tax (房产税 — fángchǎn shuì): applies in Shanghai and Chongqing under pilot rules; other cities have proposed expanding it. Rates: 0.4%–1.2% depending on the city. (2) Rental income from Chinese property: 20% IIT on net rental income (taxable amount = rental income × 80% after a deemed 20% expense deduction). Withholding at source by lessees for commercial properties. (3) Capital gains on property sale: 20% IIT on gains (in addition to deed tax, VAT on the gross transaction, and local surtaxes — total transaction taxes can be 5–10% of sale price). Non-resident obligations: once a non-resident in China, only Chinese-source income is subject to Chinese IIT. File via your local competent tax authority if you have ongoing Chinese-source income. China-USA DTA (1984, updated): Chinese dividends: 10% withholding for US residents; reduced from the standard 20% domestic rate. Chinese interest: 10% under DTA. Pensions: Article 19 allocates primary taxing rights on pensions to the country of source — Chinese pensions remain China-taxable for US residents.