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Getting out of Chinese taxes for 3 years?
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isitts



Joined: 04 Jun 2010
Posts: 193
Location: Korea

PostPosted: Fri Apr 20, 2012 7:37 am    Post subject: Reply with quote

naturegirl321 wrote:
isitts wrote:
shadowrider wrote:
sure he is not referring to the $95K or so foreign-exclusion income? IRS 2555 form stuff? You still have to file. You won't come anywhere near that income in China. BUT, if you were in the US more than 35 days in on fiscal or calendar year you don't get it.

http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html


Naw. She knows about the 2555. And there's no "3 year limit" for that.

...and the link you gave is for small businesses. Wink


Yep, not sure WHY it's in the small business section, but it is


Oops... So it is. Embarassed Anyway, I trust you saw my previous post? I think I'd try to get more details from your school.
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Julli4u2



Joined: 13 Mar 2012
Posts: 13

PostPosted: Sat Apr 21, 2012 2:59 am    Post subject: Reply with quote

once you get registered with the university's HR system and get your login info you'll be able to see more info about the 3 year tax-free status.

UK is on the list and the double taxation treaty can be found here - http://www.hmrc.gov.uk/international/uk-china-dta2011.pdf. It was signed last year and has not yet entered into force. The article you are looking for is #21.

for US citizens - the tax treaty between US and China was signed back in the 80s - http://www.irs.gov/pub/irs-trty/china.pdf. The article for teachers is #19.

Both treaties refer to income tax only (i mean individuals here as i for obvious reasons did not read the business parts of the treaty).

In order to apply for tax exemption you need 2 documents:
1 - Certificate of resident status issued by responsible tax office of the Contracting State in which the claimant is a resident (that's form 6166 for US citizens/residents), can be found on IRS page together with form 8802 that you need to fill out to apply. Current fee is $85. There're also instructions to form 8802 that can be found on IRS website as well and they are pretty straight forward.
2 - The form "Non-resident's Claim for Treatment under Double Taxation Agreement (DTA) (for record)" - you will need to fill out this form upon arrival in China.

So, to sum up, if you filed your tax return for the previous year you have the IRS green light to file form 8802. The details for how to do it from Korea I do not know as we are in the US. But i believe the instructions will tell you everything.

Hope this helps guys.

oh and by the way, for those of you who are US tax residents and can still do that - it can take a couple of months and your income will be taxed BUT as soon as chinese government approves your tax exemption status you will be reimbursed Smile
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toteach



Joined: 29 Dec 2008
Posts: 273

PostPosted: Sat Apr 21, 2012 5:24 am    Post subject: Reply with quote

My accountant in the States doesn't have me claim my Chinese teaching income on my US Taxes because I was already taxed on it in China. She makes it pretty simple. No forms for me to fill out at all, and I've never had any problems...
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choudoufu



Joined: 25 May 2010
Posts: 3325
Location: Mao-berry, PRC

PostPosted: Sat Apr 21, 2012 5:58 am    Post subject: Reply with quote

toteach wrote:
My accountant in the States doesn't have me claim my Chinese teaching income on my US Taxes because I was already taxed on it in China. She makes it pretty simple. No forms for me to fill out at all, and I've never had any problems...


.............yet.
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naturegirl321



Joined: 04 May 2003
Posts: 9041
Location: home sweet home

PostPosted: Mon Apr 23, 2012 7:19 am    Post subject: Reply with quote

toteach wrote:
My accountant in the States doesn't have me claim my Chinese teaching income on my US Taxes because I was already taxed on it in China. She makes it pretty simple. No forms for me to fill out at all, and I've never had any problems...


Hm, that's weird. My accountant makes me claim my foreign income. Legally you SHOULD. You usually don't pay taxes on it due to 2555. But you'd better be claiming it. Or looking for a different accountant.
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naturegirl321



Joined: 04 May 2003
Posts: 9041
Location: home sweet home

PostPosted: Mon Apr 23, 2012 7:21 am    Post subject: Reply with quote

Julli4u2 wrote:
once you get registered with the university's HR system and get your login info you'll be able to see more info about the 3 year tax-free status.


They sent me a link. It's not working though
Sharon
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Julli4u2



Joined: 13 Mar 2012
Posts: 13

PostPosted: Mon Apr 23, 2012 3:47 pm    Post subject: Reply with quote

naturegirl321 wrote:
Julli4u2 wrote:
once you get registered with the university's HR system and get your login info you'll be able to see more info about the 3 year tax-free status.


They sent me a link. It's not working though
Sharon


yeah, ours didn't work either - just send them an email and they'll fix it. It is for those who apply through their website i guess so they need to manually make everything active for you.
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naturegirl321



Joined: 04 May 2003
Posts: 9041
Location: home sweet home

PostPosted: Mon Apr 23, 2012 11:57 pm    Post subject: Reply with quote

I did. Twice to HR, and twice to a couple other people. Nothing.
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isitts



Joined: 04 Jun 2010
Posts: 193
Location: Korea

PostPosted: Tue Apr 24, 2012 1:02 pm    Post subject: Reply with quote

Julli4u2 wrote:
once you get registered with the university's HR system and get your login info you'll be able to see more info about the 3 year tax-free status.

UK is on the list and the double taxation treaty can be found here - http://www.hmrc.gov.uk/international/uk-china-dta2011.pdf. It was signed last year and has not yet entered into force. The article you are looking for is #21.

for US citizens - the tax treaty between US and China was signed back in the 80s - http://www.irs.gov/pub/irs-trty/china.pdf. The article for teachers is #19.

Both treaties refer to income tax only (i mean individuals here as i for obvious reasons did not read the business parts of the treaty).

In order to apply for tax exemption you need 2 documents:
1 - Certificate of resident status issued by responsible tax office of the Contracting State in which the claimant is a resident (that's form 6166 for US citizens/residents), can be found on IRS page together with form 8802 that you need to fill out to apply. Current fee is $85. There're also instructions to form 8802 that can be found on IRS website as well and they are pretty straight forward.
2 - The form "Non-resident's Claim for Treatment under Double Taxation Agreement (DTA) (for record)" - you will need to fill out this form upon arrival in China.

So, to sum up, if you filed your tax return for the previous year you have the IRS green light to file form 8802. The details for how to do it from Korea I do not know as we are in the US. But i believe the instructions will tell you everything.

Hope this helps guys.

oh and by the way, for those of you who are US tax residents and can still do that - it can take a couple of months and your income will be taxed BUT as soon as chinese government approves your tax exemption status you will be reimbursed Smile


Is this 3 year exemption only available for certain kinds of schools? Seemed a number of users on the first page had never heard of this. In K-land and Japan, the term is 2 years, but it's only available if you work at public schools.

Also, the link for the IRS (US) site gives a 404 error.
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Julli4u2



Joined: 13 Mar 2012
Posts: 13

PostPosted: Tue Apr 24, 2012 11:24 pm    Post subject: Reply with quote

http://www.irs.gov/businesses/international/article/0,,id=169483,00.html - this one should work.

This treaty is only for China. The terms are different for different countries and vary from 1 to 3 years.

this is what article 19 says (US - China):

ARTICLE 19
(Teachers, Professors and Researchers)
An individual who is, or immediately before visiting a Contracting State was, a resident of the other Contracting State and is temporarily present in the first-mentioned Contracting State for the primary purpose of teaching, giving lectures or conducting research at a university, college, school or other accredited educational institution or scientific research institution in the first mentioned Contracting State shall be exempt from tax in the first mentioned Contracting State for a period not exceeding three years in the aggregate in respect of remuneration for such teaching, lectures or research.
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isitts



Joined: 04 Jun 2010
Posts: 193
Location: Korea

PostPosted: Wed Apr 25, 2012 6:10 am    Post subject: Reply with quote

Julli4u2 wrote:
http://www.irs.gov/businesses/international/article/0,,id=169483,00.html - this one should work.

This treaty is only for China. The terms are different for different countries and vary from 1 to 3 years.

this is what article 19 says (US - China):

ARTICLE 19
(Teachers, Professors and Researchers)
An individual who is, or immediately before visiting a Contracting State was, a resident of the other Contracting State and is temporarily present in the first-mentioned Contracting State for the primary purpose of teaching, giving lectures or conducting research at a university, college, school or other accredited educational institution or scientific research institution in the first mentioned Contracting State shall be exempt from tax in the first mentioned Contracting State for a period not exceeding three years in the aggregate in respect of remuneration for such teaching, lectures or research.


Awesome. Thanks!
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wangdaning



Joined: 22 Jan 2008
Posts: 3154

PostPosted: Wed Apr 25, 2012 6:32 am    Post subject: Reply with quote

Some things to note. Make sure you are a resident of the US. Also, be aware that if you get out of the Chinese taxes on this you must pay taxes to your country of residence. It is meant to avoid double taxation, not to make zero taxation. In my case, if I were to pay US taxes on my income, I would pay more than I do here.
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isitts



Joined: 04 Jun 2010
Posts: 193
Location: Korea

PostPosted: Wed Apr 25, 2012 6:37 am    Post subject: Reply with quote

wangdaning wrote:
Some things to note. Make sure you are a resident of the US. Also, be aware that if you get out of the Chinese taxes on this you must pay taxes to your country of residence. It is meant to avoid double taxation, not to make zero taxation. In my case, if I were to pay US taxes on my income, I would pay more than I do here.


Not if you pass the physical presence test on form 2555 (foreign earned income exemption).
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Javelin of Radiance



Joined: 01 Jul 2009
Posts: 1187
Location: The West

PostPosted: Wed Apr 25, 2012 9:00 am    Post subject: Reply with quote

Good news. When the puzzle is solved be sure to let us know. I'm tired of paying taxes and would like to just avoid paying them to any government.
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isitts



Joined: 04 Jun 2010
Posts: 193
Location: Korea

PostPosted: Wed Apr 25, 2012 12:57 pm    Post subject: Reply with quote

Javelin of Radiance wrote:
Good news. When the puzzle is solved be sure to let us know. I'm tired of paying taxes and would like to just avoid paying them to any government.


Well, I think Jullu4u2 cleared things up. The tax exemption from both countries would only be within your first three years in China. And you'd have to be working at a public school. Generally, buxibans aren't recognized as educational institutions.

The way it would work is (presuming you're within your first three years in China and working at a public or otherwise recognized educational institution):

1. Get the residency certificate from the IRS. This tells China that the US is your tax home and and therefore don't owe taxes to China. As wangdaning said, this means your income is taxable in the US...but...

2. If you have been in China for 330 days (and make less than ~US$91k/year), then you pass the physical presence test on form 2555 (foreign earned income exemption) and therefore don't owe taxes to the IRS.

Under those conditions, you'd be exempt from paying taxes in both countries during the first three years in China.

After the three years is up, you pay taxes to China (but still file the 2555 to be exempt from taxation in the US).

Again, this is presuming you work at a recognized educational institution. That tends to mean public school. Not a buxiban.
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