In 2025, a key node is known as "the first year of CRS taxation" in the industry, with the disclosure of millions of typical cases of overseas tax supplements in Shandong, Shanghai, and other places, and the intensive attack of tax authorities through SMS, APP reminders and three rounds of early warning by telephone, an unprecedented overseas income supervision storm is rapidly sweeping across the country.

Data shows that since 2025, nearly 3 million yuan in taxes have been recovered nationwide for failing to report overseas income. According to current regulations, late payment penalties are charged at 0.05% per day, with the maximum penalty reaching up to 100% of the tax principal. If overseas income is concealed and found to be tax evasion, the penalty can range from 50% to 5 times the amount of the tax (Article 63 of the Tax Collection and Administration Law). In severe cases, it can even lead to criminal charges.

Behind this storm lies the CRS (Common Reporting Standard) mechanism, a network of information sharing involving over 120 countries and regions worldwide. — Your overseas bank statements, investment returns, and company dividends are being transmitted in real-time to China's tax system through an automatic exchange mechanism. Whether it's high-net-worth individuals 'offshore asset allocation or the salary arrangements for dispatched employees of overseas companies, the once isolated' information silos' are now a thing of the past.

This article will explain the key points of tax planning and compliance for overseas employees and local employees of enterprises going abroad.

The Common Reporting Standard (CRS), introduced by the Organisation for Economic Cooperation and Development (OECD) in 2014, aims to combat cross-border tax evasion and enhance tax transparency. The core mechanism involves financial institutions in various countries automatically collecting account information of non-residents, which is then annually exchanged internationally by tax authorities to track cross-border financial assets and income.

At present, more than 120 countries and regions, including China, Singapore, the United Kingdom, France, Germany, Australia, and the United Arab Emirates, have joined the CRS. China has officially implemented the CRS since 2017, and has carried out information exchange in accordance with the Measures for the Administration of Due Diligence on Tax Information of Financial Accounts (Trial) and other regulations.

According to the CRS requirements, financial institutions are required to identify the tax resident status of their customers and regularly report non-resident account information, which is then exchanged with other countries. This enables Chinese tax authorities to keep track of the balance, income and transaction details of Chinese tax residents' financial accounts abroad.

The information collected and exchanged by CRS includes:

• Types of financial institutions: banks, trusts, securities brokers, investment companies, insurance institutions, etc..

• Asset types: deposit account, custodian account, investment equity in stocks and bonds, insurance and annuity contracts with cash value;

• Personal information: name, date of birth, tax resident country, taxpayer identification number, address, etc.

一. What is a Chinese tax resident?

According to the Individual Income Tax Law of the People's Republic of China, a person is a Chinese tax resident if he meets any of the following conditions:

• Having a household registration or residence in China (including habitual residence in China due to household registration, family and economic interests);

• No domicile but has resided in China for a total of 183 days within one year.

二. What overseas income needs to be taxed?

"Overseas income" usually refers to the income earned by employees for  labour, services, and investment abroad, such as:

• Overseas salary and wages (such as remuneration received by employees stationed in overseas subsidiaries), overseas labour remuneration (such as income from contracted projects and remote services), service remuneration,  and royalties;

• Capital income such as rental income, dividends and interest income from overseas real estate;

• Income from property transfer, accidental income, etc.

三. How to tax income from overseas?

According to the Individual Income Tax Law and Announcement No.3 of 2020, comprehensive income and business income derived from overseas by individual residents should be combined with similar income in China for tax purposes; while interest, dividends  bonuses, property leasing, property transfer and contingent income should be taxed separately.

四. How to determine the tax payable?

The key depends on the employee's tax resident status and the source of income. According to Chinese tax law, there are several typical scenarios:

(1) The employee is a tax resident of China (having a domicile in China or residing in China for 183 days in a year)

• Global income (including overseas income) must be declared in China.

• If the tax has been paid abroad, the tax deduction may be enjoyed in accordance with the Sino-foreign tax agreement.

• Enterprises should pay attention to whether they have signed a double taxation avoidance agreement (DTA) with the country, and if so, they can reasonably enjoy credit or exemption treatment.

(2) The employee is not a Tax resident of China (less than 183 days in China and no domicile).

• Only individual income tax is required for income derived from sources in China.

• Income obtained abroad does not need to be declared in China.

• If you work overseas for more than 183 days, you may also constitute a local tax resident and be required to  fulfil your tax obligations in that country;

(3) The employee is a dual tax resident (both Chinese and foreign residents meet the resident identification standards)

The tax country (based on residence, economic interest centre , number of days of residence, etc.) should be further confirmed according to the "tax resident determination clause" of the bilateral double taxation avoidance agreement (DTA) to avoid double taxation.

五. If I have paid tax abroad, do I need to pay tax in China?

Tax credit policy (avoid double taxation):

• Tax residents of China who have paid income tax on their overseas income in accordance with local laws and regulations may enjoy tax credit policies in China according to the provisions, but the amount shall not exceed the amount of tax payable on such income calculated in accordance with  Chinese tax laws.

• The excess amount can be carried forward to the credit limit balance of other income in the same country within the next five tax years, realising "inter-period deduction".

六. Under what circumstances is a bilateral or two-way declaration required?

七. How to correctly declare overseas income in China?

Individual residents shall file tax returns on income derived from outside China within the period from March 1 to June 30 of the following year

Platform: Individual income tax APP, natural person electronic tax bureau (etax.chinatax.gov.cn) or unit final settlement.

Enter income:

• Domestic income is automatically pre-filled, while overseas income needs to be filled in manually (converted into RMB and attached with overseas tax payment certificate)

• Distinguish between comprehensive income (wages,  labour services, etc.) and other income (dividends, property transfer, etc.)

Calculation of credits:

• The system automatically calculates the amount of tax payable and manually fills in the amount of tax paid abroad (the part exceeding the Chinese tax rate can be carried forward for 5 years)

• You need to upload overseas tax payment certificate, bank payment voucher and other materials (up to 15)

More and more countries around the world are strengthening the identification of tax resident status for multinational employees. If enterprises do not plan, they may be liable for huge late fees, global income taxes, and joint liability risks due to employees "accidentally" becoming tax residents. The following are the standards for identifying tax residents and global taxation rules for common target countries for Chinese enterprises going overseas:

United States: Global taxation, both citizens and tax residents, are required to report global income

Tax resident determination: A U.S. citizen or green card holder, or a person who passes the "actual residence test" to become a tax resident.

Tax system: Tax residents, whether they live in the United States or not, are required to report their global income; FATCA is implemented, and global financial institutions are required to report their U.S. accounts to the IRS; foreign tax credits (FTC) can be used to deduct personal income taxes paid in other countries.

Caveat: Companies should assess their global tax obligations and risks when employees with U.S. citizenship or green cards work overseas.

Singapore: local tax, overseas income not remitted can be exempted

Tax resident determination: a foreigner who has resided/worked in Singapore for more than 183 days in one year, or has worked continuously in Singapore for more than two years with a total stay of at least 183 days.

Taxation system: Only income from Singapore is taxed. Residents' overseas income can be exempted from tax if it is not remitted to the local area.

Note: Non-residents are subject to a single tax rate and no personal tax allowance; the Singapore Inland Revenue Department has a strong data matching system, so tax declaration planning should be carried out in advance

Germany: global taxation, living for 6 months is a tax resident

Tax resident identification: A tax resident is defined as a person who has resided continuously for six months (short-term departure does not affect the determination); non-residents who have stayed for less than 183 days in 12 months and whose remuneration is paid by an overseas employer are exempt from taxation.

Tax system: Tax residents are required to report their global income, with the highest rate of 45% for high earners, plus solidarity tax and church tax.

Note: You can apply for bilateral tax treaty exemption; if the enterprise pays German social security for expatriate employees, or mistakenly sets up a permanent establishment, it is easy to trigger tax recovery.

Vietnam: Global taxation, tax resident if any of the conditions are met

Tax resident determination: A tax resident is defined as one who has stayed for 183 days or more in 12 months 12 months, or holds a permanent residence card, or has signed a local lease contract for more than 183 days.

Tax system: Tax residents are required to pay taxes on their global income, while non-residents are only required to pay taxes on income from Vietnam sources at a flat rate of 20%.

Note: The complete records of the visa and stay time of foreign employees must be kept for short-term work arrangements; the overseas company shall pay salaries and make a consolidated declaration  under Vietnam tax law.

Thailand: Territorial taxation is shifting to global taxation, and foreign income remitted needs to be taxed

Tax resident determination: A tax resident is defined as one who has resided in Thailand for 180 days in a year.

Changes in the tax system: The original territorial tax only taxes income from Thailand. From 2024, tax residents will also have to declare and pay tax on foreign income remitted to Thailand.

Compliance reminder: Foreign currency income can be retrospectively taxed by the Thai Taxation Bureau, so it is necessary to clarify the remittance records and purposes; it is recommended to use targeted remittance, enterprise proxy issuance and other means to accompany the compliance path.

South Africa: Global taxation, tax residents are those who meet the residency criteria

Tax resident determination: A tax resident is defined as a person who has stayed for more than 91 days in the current tax year, or has stayed for more than 91 days each of the five consecutive years, totalling more than 915 days, or has the status of "tax resident".

Tax system: Tax residents are required to declare and pay taxes on their global income, while non-residents are only required to pay taxes on income sourced in South Africa.

Note: South Africa is strict in the determination of residence and "subjective sense of belonging"; leaving the country does not mean giving up tax status; it is strongly recommended to terminate the application for tax resident status before the employee leaves the country.

Residence time and identity compliance management

Scientific planning of travel time:

According to the residency days of each country, the stay time of expatriate employees should be reasonably arranged to avoid inadvertently triggering global tax obligations.

For example, German expatriates can use the "segmented business trip + remote collaboration" method to control less than 183 days.

Avoid "pseudo self-employment" recognition:

For short-term project personnel or freelancers, the enterprise may sign a flexible employment service contract, but it must meet the characteristics of a non-employee:

• Bring your own equipment and work independently;

• The Service Scope Description, Proof of Delivery of Results and other materials shall be retained.

Salary structure compliance  optimisation

Salary split by location of work:

For example, if a foreign employee in Vietnam works in Vietnam for 120 days, 60% of his/her salary can be paid by a Vietnamese entity and declared at the non-resident tax rate, while 40% can be paid by the overseas parent company and incorporated into the domestic individual income tax system.

Reasonable use of tax treaties:

Make good use of bilateral tax treaties between China and other countries to seek tax exemption for non-residents or tax only in one country.

If a German expert comes to China for short-term service (up to 183 days), if the salary is paid by the German side, the Chinese individual income tax can be exempted.

Welfare, deductions and social security coordination

Design compliant  tax-free benefits:

In countries where pre-tax deductions are allowed (such as Thailand and Vietnam), part of the salary can be converted into a compliant allowance.

Non-monetary benefits take precedence:

In countries where welfare is considered as salary, apartments and company cars are preferred to reduce the taxable wage base.

Social security coordinated payment:

Use bilateral social security agreements to apply for exemption from local social security contributions for expatriate employees and avoid double payment.

Build a full-process compliance system

Establish a tax compliance  centre:

Centralised management with system tools (such as HR SaaS platform tax module):

•  Record of employees' global residence days;

•  Salary distribution and matching with the place of work;

• List of applicable tax treaties and supporting materials.

A three-level review mechanism has been established in high-risk countries:

For countries with strict taxation, such as the United States and South Africa, a three-review and three-proofreading mechanism of "contract-tax form and declaration materials" will be implemented to avoid omissions.

Prevent disputes and preserve key information:

For example, cross-border bonus distribution and proof of working in different places should be communicated with tax authorities in advance, apply for rulings, and all transaction documents and tax vouchers should be kept for more than 7 years.

With the full implementation of CRS (Common Reporting Standard) globally, cross-border tax compliance has become a routine challenge for companies expanding overseas. Companies must reassess their HR and financial management practices to ensure that the income declarations of both domestic and international employees and freelancers comply with local regulatory requirements. As compliance costs rise and regulations tighten, relying on a professional global employment compliance platform has become crucial for companies to reduce costs, enhance efficiency, and ensure stable expansion overseas.

YiYi Global Technology is dedicated to offering integrated global employment compliance solutions for businesses, covering international hiring, salary settlement, tax declaration, and risk management. This platform fully supports companies in achieving compliant employment and efficient management of global talent. The platform features a built-in global tax compliance engine that automatically identifies employees' tax resident status, intelligently matches bilateral tax agreements, and assists companies in optimising their tax planning, significantly enhancing the compliance and operational efficiency of cross-border employment.

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