Taxpayer is also called as tax main body who takes the responsibilities of paying tax. The taxpayers for individual income tax refer to the units or individuals who burden the direct tax obligations in accordance with the “Individual Income Tax Law of People’s Republic of China (PRC)”. (hereinafter referred to as the Tax Law).

In accordance with the Tax Law, the taxpayers of individual income tax include individuals who have domicile in China or have no domicile but reside in China for an accumulated 183 days or more within one tax year on their income derived from sources within or outside China, and individuals who have no domicile or residency in China or reside in China for less than an accumulated 183 days within one tax year, but have income derived from sources within China. 

The taxpayers include exactly:

(1)	Individual Chinese citizens and individual industrial and commercial households.
(2)	Residents of Hong Kong Special Administrative Region and Macao and Taiwan compatriots and overseas Chinese.
(3)	Foreign individuals.

In accordance with the international practices, the Tax Law stipulates that China shall concurrently exercise the taxation jurisdiction on the resident and on the place where the source of income is derived. In respect of the resident, China shall exercise the right of taxation on his worldwide income and gains; in respect of the non-resident, China shall exercise the right of taxation on his income derived within China on which the non-resident taxpayer shall be liable. In the last analysis, the incidence of taxation by China shall be determined pursuant to the principles of the domicile of origin and the domicile of dependency.

The resident taxpayer identity and tax liability shall be determined on the basis of the domicile and length of residence. Thereby, the taxpayer shall fall into the resident taxpayer and the non-resident taxpayer.

Individuals who have domicile in China or have no domicile but reside in China for an accumulated 183 days or more within one tax year shall be regarded as “resident”.

Resident taxpayers subject to individual income tax on the income derived from sources within and outside of China in accordance with tax law. For individuals who do not have domicile within the territory of the China reside in China for an accumulated 183 days or more during a year and for less than six consecutive years, their income derived from sources outside of China which is paid by an enterprise or individual outside of China, shall be exempt from individual income tax after filing with the competent tax authorities. For individuals who reside in China for an accumulated 183 days or more during a year but have a single trip out of China for more than 30 days, their consecutive years threshold for an accumulated 183 days or more during a year shall reset.

Individuals who have no domicile or residency in China or reside in China for less than an accumulated 183 days within one tax year shall be considered as “non-resident”.

Non-resident taxpayers subject to individual income tax on the income derived from sources within China in accordance with tax law. For individuals who do not have domicile within the territory of China, but reside in China consecutively or accumulatively for not more than 90 days in any one tax year, their income derived from sources within China which is paid by an employer outside China, and which is not borne by the employer's establishment or business place within China shall be exempt from individual income tax.

With the aim to exercising the tax jurisdiction effectively, China introduces two standards of domicile and length of residence in respect of the identification of the resident taxpayer and the non-resident taxpayer in line with the international practices.

(1)

Domicile standard The term "domicile" refers to the concept specific to the Tax Law instead of the habitation or the living place. The term "individuals who have domicile in China" shall mean individuals who by reason of their permanent registered address, family or economic interests, habitually reside in the People's Republic of China in accordance with Article 2 of the Regulations for the “Implementation of the Individual Income Tax Law of the People's Republic of China”. (a)  Registered permanent residence: it is also called domiciliary register which is entitled to Chinese citizens. In terms of the foreign individuals who reside permanently in China and have received long-term residence permit or temporary residence permit under the control of the Chinese household register, but they shall not be deemed to have domicile within the borders of China due to the fact that they are not individuals who by reason of their permanent registered address, family or economic interests, habitually reside in the People's Republic of China.

b) Economic Interests: It mainly covers personal property and business transaction centre etc. c)  Habitual residence: It does not refer to the actual residence or the apartment in a particular period according to the relevant regulations of the document Guo Shui Fa [1994] 089 issued by the State Administration of Taxation. It is generally understood that, those individuals who live outside China due to study, work, visiting relatives or tour, after the end of these activities, the reasons for them to live outside China no longer exist and therefore must return to live within China, and then China is the country of the tax payer's habitual residence.

(2)

Length of residence standard In accordance with the tax law, individuals who reside in China for an accumulated 183 days or more within one tax year shall be regarded as “resident” and subject to individual income tax on the income derived from sources within and outside of China. The day that they spend 24 hours in China will be counted as one day, and they spend less than 24 hours in China will not be counted for calculating the number of residence days in China. Therefore, when we identify resident and non-resident taxpayer, the points that merit attention are as follows: firstly, we shall check whether the taxpayer has domicile within the borders of China. Individuals who have domicile within the borders of China shall be the resident taxpayers without consideration of the length of residence. Secondly, in terms of individuals who are not domiciled within the borders of China, their resident taxpayer shall be identified depending on the length of residence in China. Individuals who have resided within the borders of China for no less than 183 days in a tax year shall be the resident taxpayer, otherwise the non-resident taxpayer.

Chinese resident taxpayers of China identified in compliance with the above mentioned standards shall be liable for tax on any income from within and outside China; The non-resident taxpayer of China identified in compliance with the above mentioned standards shall be liable for tax on any income from within China and pay individual income tax.