If you're an expatriate working in China, understanding how your salary is taxed can be challenging—especially when your tax obligations depend heavily on how long you stay in the country.

This guide breaks down the first and most important step in calculating your Individual Income Tax (IIT): determining whether you're a resident or non-resident for tax purposes—and what that actually means for your paycheck.

Step 1: Determine Your Tax Residency Status

China’s tax system classifies individuals based on the number of days they spend in the country within a calendar year (January 1 to December 31).

1. If you stay in China for 183 days or more in a tax year, you are generally considered a tax resident.

2. If you stay for less than 183 days, you are treated as a non-resident.

This distinction matters because it affects:

1. Which income is taxed in China

2. What tax rates apply

3. Whether you can access certain exemptions

Step 2: What "Resident" Really Means for Expats

If you're classified as a tax resident, it doesn’t automatically mean you're taxed on everything you earn worldwide. This is where many expats get confused—and where China’s rules are actually more favorable than they seem.

Important: China applies a special rule for expatriates known as the “Six-Year Exemption”.

----If you’ve been a tax resident no more than six consecutive years, you may be exempt from Chinese tax on:

           1. Income earned outside China

           2. That is paid by an overseas employer (not a Chinese entity)

---Once you’ve been a resident for six consecutive years, you become liable for Chinese tax on your global income—including overseas salary, investments, or rental income.

This rule makes residency status even more important: even if you're technically a resident, you might still not be taxed on foreign income if the conditions are met.

If you spend fewer than 183 days in China, your tax obligations are much simpler:

1. You are taxed only on your China-sourced income

2. Typically, this means salary paid for work performed inside China

3. No tax on overseas income or assets

Non-residents are subject to a slightly different rate structure, and do not qualify for the 6 standard deductions  as residents but still can enjoy item deductions with qualified fapiao. （Please refer to 財政部 稅務總局公告2023年第29號）

Once your status is clear, the next step is applying the correct tax calculation method.

----Residents are taxed on their global income, but may benefit from:

1. The Six-Year Exemption (if applicable)

2. Standard deductions and progressive tax rates under China's Comprehensive Income system

----Non-residents are taxed only on China income, using a simplified monthly calculation method with different brackets.