Does China tax assets outside the country?

I have been living in China for quite a while. In fact, I'm coming up on five years without having left the country for a consecutive month ever. Why is this important? I was told that China now has a low that if foreigners are in the country more than five years and have no left the country for at least a month at any point, the government gets to tax your foreign assets.

Now I don't know if it's true, and I can't see how they would even know if I own Microsoft stock for example, but I'm concerned enough that I'm planning a long trip home. If someone knows about this I would really appreciate it.

Comments

No Luck

On May 24th, 2007 Ellen says:

I tried to look into this because I've heard rumors about this too. I couldn't find anything, but I just can't imagine there would be any way for them to know what you own abroad. It's a risk I guess, but it seems like a pretty safe bet.

Of course if it was me I'd just go to Thailand or Europe for a month.

Hi; The State

On May 26th, 2007 ChrisDevonshire... says:

Hi;

The State Administration of Tax DOES have a regulation that if you live in China for more than five years, they can tax you on your worldwide income. This raises two issues:

1) How can you avoid this ?
2) Could they really collect on it ?

For (1), you can break up the five year period by either:
i) Staying out of China for 90 days in any 12 month period, or
ii) Staying out of China for a consecutive 30 day period

This breaks up the 5 year length and gievs you a new 5 year period. Most long term expats do (ii) and have a well deserved month holiday out of the PRC.

Concerning (2), I asked the SAT if they had ever collected on worldwide taxable income and the rather bashful answer was "no". However, they do have the right and it is worth bearing in mind international tax authorities are now sharing information about the movement of their nationals. With a seven year statue of limitations, it's probably a good idea not to get into the situation that triggers this. So - award yourselves a month off.

Chris Devonshire-Ellis
Senior Partner
Dezan Shira & Associates
www.dezshira.com

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