Tax Avoidance Planning Using The Identity Of The Taxpayer

The taxpayers of personal income tax include two kinds of tax payment obligor and non resident taxpayer.

The tax payment agent of a resident pays his personal income tax on all income derived from or within the territory of China. Instead of paying the individual income tax to the Chinese, only the residents who pay tax obligations only pay their income from the territory of China.

Obviously, non resident taxpayers will bear a lighter tax burden.

Foreigners, overseas Chinese, and compatriots in Hongkong, Macao and Taiwan who live in China, if they leave a territory for more than 30 days or leave more than 90 days in a tax year, the 90 day rule will not be regarded as a residence in China throughout the year.

Firmly grasping this yardstick, it will avoid being a resident tax paying person of personal income tax, and only pay personal income tax on income derived from China.

Example: an American engineer employed by the head office of the United States has been helping to build a project from October 1995 to a branch in China.

In 1996, he left home for 60 days to return to his head office and return home for 40 days.

The two departure times add up to more than 90 days.

Therefore, the American engineer is a non resident taxpayer.

His 96000 yuan salary from the head office of the United States is not derived from the income in China and is not subject to personal income tax.

That is to say, the American avoids becoming a taxpayer, thus saving 5700 yuan of personal income tax, that is: 12 x [(96000 / 12-4000) * 15% - 12 5] = 5700 (yuan)