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Along with the impressive development of China’s economy and globalization, the demand for skilled resources in China continues to increase. As a direct result of this, multinational companies with entities in China have been identifying high potentials within their organizations to dispatch them on temporary secondment arrangements to China to assume key technical, management or other positions with the Chinese entity.
In this publication local Corporate Income Tax implications for organizations as well as the Individual Income Tax implications for secondees are discussed extensively.
Attention goes further out to the advantages of Double Taxation Agreements; on how to handle and avoid double payment of taxes between the jurisdictions as well as preferential treatments applicable, which have a mitigating effect on tax liabilities..
Due to the fact that some foreign companies have been providing services to Chinese entity under the guise of secondment arrangement in the past and thus avoiding taxes, China in recent years has increased its legislation and focus on secondment arrangements. Means of risk mitigation are discussed as it is imperative that secondment arrangements are well embedded in the organization and proof in regards of substantiating the genuine nature of the secondment arrangement, the non-resident home entity should be well documented.
The information is not exhaustive, but aims to provide entrepreneurs with an in-depth understanding of China’s perspective of inbound foreign secondment and the local taxation implications it may have, to support their business decision on whether to implement secondment arrangements within their organizations.
For foreign employees considering to work in China it aims to provide insight in China’s payroll and taxation system, to support in the decision whether or not to work in China.