Foreign workers in China are generally required to pay Individual Income Tax (IIT) on income earned in the country. Tax obligations depend on residency status:

• Those staying in China for 183 days or more in a calendar year are considered resident taxpayers, and will need to fill the annual reconciliation with the tax bureau. Resident taxpayers staying in China for more than 5 consecutive years will also be taxed in China on their global income.
• Those staying in China for less than 183 days in a calendar year are considered non-resident taxpayers, and are taxed only on income sourced in China (on a withholding basis by their employers)

China uses a progressive tax system for individual income, with rates ranging from 3% to 45%, depending on the income bracket. For foreign citizens, potential exemptions for certain allowances and deductions are granted, like housing subsidies or children’s education. Some foreign-sourced income may also be exempt under bilateral tax treaties between China and the foreign worker’s country of origin.

In addition to income tax, foreign workers need to contribute to China’s social insurance system, unless exempted under a bilateral social security agreement (this is the case only of a handful of EU Member States). Contributions are paid by both the employee and the employee; rates vary from province to province. Upon leaving China, foreign employees can reclaim their own pension contributions (this is done through their last employer).