China / UK Employment Income tax

Joshua_Evans · 18 August 2017 at 8:51AM

Hi All,

I'm moving with my company to China. I will be living/working in China at least 10 months a year a living and working in UK for 2 months a year.

I've done some research but would like to take some advice on the relationship between income tax in UK/China. Specifically which country I need to pay tax in and whether I'm classified as a UK citizen still etc.

I'm planning to be paid into a UK bank account and transfer money to China because I keep up my national insurance contributions and have all the rights of a UK employee, pension etc.

From my reading if I get paid from a UK company into a UK bank account I don't have to pay Chinese tax for the first 5 years. I don't know how long I will be staying in China yet but if i can keep it simple and stay paying tax in UK that would be preferable.

If anyone has any advice or point me int he direction of a tax advisory service or website that understands the relationship between UK and China it would be much appreciated.

Thanks,
Joshua

00ec25 · 18 August 2017 at 12:33PM

citizenship and tax ;liability are different things. If you have a UK passport you are a UK citizen and will remain so forever (unless you actively renounce it). If you were born in the UK then of course you have a right to claim UK citizenship anyway and as such you automatically retain the right to a UK personal allowance against your UK tax liability

for tax purposes the jargon used is "residency" not citizen

I assume you have read the UK - China tax treaties which explain who pays tax in which country ?
https://www.gov.uk/government/publications/china-tax-treaties

a 10/2 living pattern may be enough that you remain classed as a UK resident if you are thus spending more than 30 days working in the UK per year
https://www.gov.uk/tax-foreign-income/residence

https://www.gov.uk/tax-uk-income-live-abroad

it would help if the company retained a legal presence in the UK as you keeping a UK bank account is not the real flag of where your income originates from for tax purposes: UK or abroad. In theory if you only work 2 months in the UK then only those 2 months will be subject to UK income tax if your status is non resident

Joshua_Evans · 21 August 2017 at 2:40PM

Thanks for the info.

My company will have a UK presence, I am just transferring offices.
I will working 10 months in China - 2 months in UK
I want to retain my NI and Pension contributions hence why i want to be paid from the UK company.
I do not want to be paying double taxation.
I would rather just pay tax in one country.

sheramber · 21 August 2017 at 6:55PM

from this http://www.china-briefing.com/news/2015/01/28/paying-foreign-employees-individual-income-tax.html it would appear you will be liable to Individual Income tax in China on income for work done in China

Scenario Two: Foreign Individuals Residing in China for More than 90 Days but Less than One Year (the “One-year Rule”)

An individual who has resided in China for more than 90 days but less than one year during the tax year is subject to IIT on all China-sourced income, including income paid by both Chinese and overseas entities for his/her work in China. Income earned while working overseas (i.e., foreign-sourced income) in the tax year is not Chinese IIT taxable.

SuperHan · 23 August 2017 at 11:59AM

This is far more complex than I think you're giving it credit for.

You need to assess both your UK and China residency position (and as other have said above, it looks as though you may be resident in both countries). Domestic law will then say both China and UK will want to tax your worldwide income (or at least the income derived from that country. It will generally be derived where you perform the duties). You will need to look at the double tax treaty to see if that exempts the income from being taxed in both countries. If that doesn't help, you'd need to look at double tax relief and any complexities arising as a result of differences in China and UK tax regimes.

National insurance contributions while abroad are more complex again (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/414910/NI38_CF83.pdf may provide some help. I don't think we have any bi-lateral social security agreements with China).

Being paid by a UK company into a UK bank account are not definitive indicators of where your income will be taxed.

You will be as well taking proper advice on this. It ay not be particularly cheap to do so, but may be much cheaper than getting it wrong.

sheramber · 23 August 2017 at 12:59PM

My son works for a UK company and is paid into uk bank account but as he works in Romania for more than 6 months of the year he has to pay tax in Romania, their rules.
He no longer pays tax in UK but has elected to continue NIC .
He had to write to Contributions Agency advising why he wanted to continue paying them.

xylophone · 23 August 2017 at 5:25PM

Should your company not be arranging for you to have the relevant advice on these matters?

China / UK Employment Income tax

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