China Permanent Residence Application & Tax Implications for Foreigners

Foreigners working in China can apply for a Foreigner Permanent Residence ID card if they wish to enjoy prolonged periods living and working in China when compared to China work visas. Having Permanent Residence status simplifies every part of life in China and will make your stay in China more secure with less red tape.

China Foreigner Permanent Residence ID card holders can leave and enter China easily and can also live in China and work here indefinitely. It provides convenient benefits relating to social security, employment, health care, children’s education, accommodation, transport, finance, property investment, and almost any part of Chinese life.

The eligibility requirements for Chinese permanent residency vary depending on the region you are in. Streamlined application processes are available in major cities such as Beijing and Shanghai as they have expanded and adopted certain policies that shorten the time it takes and also streamlined the entire eligibility criteria. Shanghai was the first city to adopt the new measures that shortened the application time greatly from 180 days to 60 days. This also included the addition of eligibility categories for foreigners wishing to reside in China.

There are now 13 categories of people in Shanghai that fulfill the criteria for permanent residency. But this is condensed into four main groups as follows:

  • Foreign employees that have key positions in enterprises in China.
  • All foreign talents.
  • Foreign investors.
  • Those who are linear relatives of Chinese citizens or foreigners who already have permanent residency in China.

The vast majority of applicants that wish to apply for the permanent residency ID cards in China are generally working staff that are in Shanghai. To become eligible for that avenue, you must already have worked for four years or more in Shanghai and stayed in mainland China for six months or more in each of those years. You also need to have earned an annual income or more than RMB 600,000 in pre-tax salary and must have paid in the region of more than RMB 120,000 in annual income tax.

Benefits of Having a Foreigner Permanent Residence ID Card

One of the key benefits of having the card is the length of its validity. Standard foreigners doing business or working in China without a permanent residence ID card have to keep renewing their residence permit every year. Having it also means you can leave and return to China without any hassle. The card can also be used as a legal certificate of your stay in China, and that can come in handy.

Those foreigners who have permanent residency are treated the same way as everybody else under Chinese labor laws, giving you the same rights and responsibilities that are usually only for Chinese citizens in the city they reside in. This really helps in regards to buying houses in China, education, and even investment.

Talking of investment, if you are a foreigner with a permanent residency card, you are eligible to set up and invest any legally obtained RMB in the registered capital of foreign-invested enterprises (FIEs) by making a direct investment or via intellectual property or tangible assets.

You can use the card as a form of identification if you need to book a hotel room or buy a train ticket, but please remember that this is not the same as being a Chinese national. You do have numerous rights but you won’t be able to join the Chinese armed forces, run for election, or have the right to vote.

How Can I Apply for a Chinese Permanent Residency ID?

Here are some of the criteria you must cover to be eligible for the permanent residency card:

  • Fill in the Application Form for Chinese permanent residency.
  • You need a valid passport, a residence permit, or a valid visa.
  • Up-to-date health certificates that were issued by domestic entry-exit inspectors in the past 6 months.
  • No criminal record abroad or in China.
  • Any company levers, tax payment slips, licenses, if you are applying for the ID through your job.
  • If the applicant is an accompanying family member, you need some proof of the relationship, i.e. marriage certificate, proof of kinship or birth certificate, and also further evidence of stable income and housing.
  • If you were once a Chinese national, you must supply your previous private passport and also the overseas resident certificate.
  • In regards to those applying as a foreign investor, you need to show a business license and any capital certification report that proves your company’s registered capital has reached the standard amount or an audit that proves that for the past three consecutive years.

Primary documents and additional materials need to be submitted by Shanghai-based applicants at the Immigration Service Center of Exit-Entry Administration Bureau of Shanghai Public Security Bureau. There will be a 90-day period to process the application that is used to investigate if the Public Security Branch needs it.

China Permanent Residence ID Card Holders Tax Implications

Not being sure whether their tax residency status in China will be impacted is a major concern for foreigners who are considering their application for a Chinese Permanent Residence ID Card. They are concerned that they might be liable to pay worldwide income tax in their home countries at the same time as paying tax in China. Nobody wants a double tax bill.

Being a foreign tax resident in China might not exclude you from paying worldwide tax income. But to be a deemed resident taxpayer in China, under Article 1 of the amended Individual Tax (IIT) Law, you must be one of the following:

You are a person who has a domicile in China. Or you are an individual that doesn’t have a domicile in China but you have resided in China for an accumulated time period of 183 days or more during a tax year that runs from 1 January to 31 December.

If you are an individual that already has a domicile in China, you are seen to be a China tax resident. This means you will still be liable to pay worldwide income tax.

You will be exempt to pay worldwide tax income on income sourced outside of China if you are a foreigner without a domicile in China according to the “six-year rule” that covers foreigners who have not lived in China for 6 consecutive years (for less than 183 days per calendar year).

In effect, a foreigner that does not have a domicile in China can reset the six-year rule if they leave China for 30 days or more consecutively. These individuals will only get taxed for any China-sourced income. This is a very comfortable route for foreigners who work in China but don’t want to trigger worldwide income tax liabilities.

There is no statutory residence test in China that has clear criteria to properly explain the domicile status. It can be a confusing issue. In China, the term “domicile” is generally translated to mean “habitual residence” and is linked directly to household registration, economic interests, and the family member’s location.

Conceptualizing “domicile” in the eyes of PRC IIT Law has a distinct definition when compared to the way that the domicile is usually defined.

It’s not a straightforward concept and can be quite subjective and obtuse. A great example would be a foreigner who already has a family and a permanent home in China because in this instant they might have economic and personal relations that are considered to be more in line with China and not their birth country. Other instances include those with historic residency in China that have available accommodation back in their home nations where their families live. It could be deemed that this foreigner might return to his/her home nation, so in this situation, the status might be applicable to their behavior or possible future geographic locations.

You can have PR status in China as a foreigner and that does not necessarily mean you have a domicile there. There are other factors that the China tax authorities might take into consideration while deciding on the tax liabilities of the Permanent Residence ID card holder.

You are indeed at a higher risk of being taxed on your worldwide income if you are a foreigner in China who has obtained a China PR status. This could happen if the China tax authorities decide there’s a chance you will continue to reside in the country and you are not going back to your home country. As a foreigner who is a China Permanent Residence ID card holder, you should prepare the sufficient evidence you will need to prove that your time in China is not a habitual residence, but is more of a temporary thing. It’s on you to provide this evidence.

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