Which portion of my U.S. income is taxable in China?

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SuperDuper

Newbie

Joined: June 08, 2006
Posts: 3
Location: L.A.
Status: Offline

Posted: June 08, 2006 - 04:05 PM
Post subject: Which portion of my U.S. income is taxable in China?

Hello all,

Thank you in advance for helping me out with this. As a U.S. citizen, if I work in China for more than 330 days a year for a U.S. firm's Chinese subsidiary while still staying on the U.S. headquarter's payroll and continuing getting my U.S. benefits (401K, health care, life insurance, profit sharing, and etc.), which portion of my income would be considered taxable by the Chinese tax bureau? Would it be the same as my taxable income in the states ( i.e. gross income minus 401K, insurance premium, and etc) or would the Chinese government tax me on my gross income? If the Chinese tax me on my gross, then I would end up paying more tax in China than in the states.

Also, is my China office required to withhold my Chinese tax if my salary doesn't come out it's budget?
What’s the standard practice most subsidiaries of foreign companies follow in terms of reporting and withholding foreign employees’ Chinese tax?

Is there anyway I can get around this?

What do you guys recommend for my situation?

oreo

Barker

Joined: Aug 25, 2005
Posts: 158

Status: Offline

Posted: June 12, 2006 - 08:39 PM

Hi, best to ask your company if it would provide you with tax assistance while you are working overseas. In general your taxable base salary in China includes your salary. China would not recognize US pre-tax deductions for 401(k), medical, etc. Thus your taxable gross in China would be higher in the US. It is not necessarily true though that you would end up paying more tax in China than the US.

Based on the situation you have described your CN office would be required to withhold taxes, even if your costs do not come out of its budget. A lot of foreign companies do comply.

My suggestion is to raise this with your company, and ask for professional tax advice. That way you know the actual rules as they apply to your situation. If you end up subject to higher tax there is always tax equalization or protection, which some employers offer.