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Investment Taxation for Expats in China

Submitted: April 2014

Taxable income in this category includes:

  • interest from bank and building society deposits
  • interest from government and corporate stocks (bonds)
  • rental income from properties both in China and abroad
  • dividends, and
  • capital gains

As a non-resident, or a non-domiciled resident (NDR), who has not stayed in China for longer than 5 years, you will generally only be liable for tax on investment income earned in China.

Interest

For residents, interest income in China generally has withholding tax of 20% deducted at source. For non-residents the rate is generally reduced to 10%, or possibly less if your country of origin has a suitable tax treaty with China. If you are a resident you will also have to pay 20% tax on interest received from other countries, and may be subject to withholding taxes in the country of origin. For residents, NDRs and non-residents, if the country of origin of interest payments has a suitable tax treaty with China, the amount of tax that can be charged by the country of origin is generally reduced to 10%.

Rental income

Generally the income tax rate on rental income is 20% for residents. For non-residents the rate is generally reduced to 10%, or possibly less if your country of origin has a suitable tax treaty with China. However rental income from a Chinese residential property is taxed at a rate of 10% rather than 20%. Tax payable is calculated after a deduction of ¥800 for amounts less than ¥4,000, and 20% of the total payment for amounts greater than ¥4,000. You will also have to pay real estate tax at an annual rate of 1.2% of between 70% and 90% of the original purchase price, or at a rate of 12% of the rental income. If you are a resident you will also have to pay tax on rental income from outside China and may be subject to withholding taxes in the country of origin.

Some of individual cities such as Chengdu, Guangzhou and Shenzen have their own ways of calculating tax payable on rental income.

Rental income must be reported on your tax return.

Dividends

For residents, dividend income in China generally has a withholding tax of 20% deducted at source. It must be reported with all your other income on your tax return. For certain classes of dividends, paid to individual investors, reduced rates of 5% and 10% apply. For non-residents the rate is generally reduced to 10%, or possibly less if your country of origin has a suitable tax treaty with China. Residents also have to pay income tax on dividends received from other countries, and may be subject to withholding taxes in the country of origin. For residents, NDRs and non-residents, if the country of origin of dividend payments has a suitable tax treaty with China, the amount of tax that can be charged by the country of origin is generally reduced to between 5% and 10%.

Capital gains

For residents, NDRs and non-residents, capital gains accrued in China are taxed at a rate of 20% must be reported on your tax return. Residents also have to pay tax on capital gains made in other countries. Certain transfers of shares listed on Chinese stock exchanges are exempt from capital gains tax. There is no capital gains tax on the sale of your main home provided you have occupied it for longer than five years. Certain disposals of personal use items are taxable.

 

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