The Six-Year Tax Rule applies to foreign nationals who reside in China for extended periods. According to Chinese tax law:
- If an expat stays in China for 183 days or more in a calendar year, that year counts as a tax resident year.
- If an individual accumulates 6 consecutive years of tax residency without leaving China for more than 30 days in a single trip, they become liable to pay tax on global income in China starting in the seventh year.
This rule is designed to determine when long-term expats transition from being taxed only on China-sourced income to worldwide income – which includes income from investments, foreign salaries, and other overseas sources.
Exemptions
The six-year count resets if the individual:
- Leaves China for more than 30 consecutive days in a single calendar year, or
- Spends fewer than 183 days in a given year.
This is known as the “break year” mechanism, which can be used strategically for tax planning.
Recent Changes in 2025
In 2025, tax authorities have introduced several important updates:
- Stricter Enforcement
Local tax bureaus are now more actively tracking foreign nationals’ stay duration through digital entry-exit records.
- Enhanced Reporting Requirements
Foreign residents approaching their sixth consecutive year are required to declare global income sources in advance, even if exemptions apply.
- Clarification on Exemptions
New guidelines outline clearer documentation requirements for claiming break-year exemptions.
- Digital Tax Filing Expansion
The IIT (Individual Income Tax) app now supports more functions for foreign nationals, including alerts about six-year status and personalized filing tips.
These changes highlight the need for ongoing monitoring and the use of professional legal compliance & tax services.
How Can Expats Stay Compliant?
1. Track Residency Days Accurately
Keep detailed records of entry and exit dates to calculate your residency status each year. Even short business or leisure trips can affect your count.
2. Plan Break Years Strategically
If you’re nearing the six-year threshold, consider spending more than 30 consecutive days outside China in a calendar year to reset the clock.
3. Declare All Income Transparently
Even if your foreign income is not taxable in China yet, it’s best to disclose it for compliance transparency – especially as reporting regulations become stricter.
4. Consult with Tax Professional
Working with local tax experts or global mobility consultants ensures proper interpretation of laws, accurate filings, and timely strategy adjustments.
Conclusion
China’s Six-Year Tax Rule is a pivotal consideration for expats aiming to stay compliant while working long-term in the country. With tighter regulations and advanced tracking systems introduced in 2025, proactive planning is more essential than ever. Leveraging expert legal compliance & tax services can help expats navigate residency thresholds, manage global income obligations, and maintain a strong legal standing in China. Planning to stay in China beyond six years? Now is the time to assess your tax strategy.
