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The Five-Year Rule Is Now the Six-Year Rule
By Apr 3, 2019 Activities
If you’ve been here long enough, you’ve heard of The Five-Year Rule. Maybe your boss disappeared on a strategically timed 30-day “vacation” or maybe a friend decided to skip the country for exactly a month. What’s that about? We’ll explain — one second — but the new news is that that rule is now The Six-Year Rule.

Like much of life, The Rule all comes down to money. See, what happens is that, if you are in China for five years straight, or now six years, without leaving for a full 30 days in a row, then China will technically be able to tax all the money you make not just in China, but around the world. That’s important if you have investments in another country, or if you make some other income outside of China. Say you own a house in America which you rent out. If you exceed the five/six years, your rental income could, in theory, be subject to China tax. (Your China income is always subject to China tax, no matter how long you are here for. No way around that.) Once you leave the country for 30 days in a row, the clock is reset for another five/six years.

In addition to that, the rule resets "the clock" to start on 1 January 2019. Any time you've spent in China before that is not counted. Happy birthday!

The new rule is part of the recently passed Individual Income Tax Law, which caused much hyperventilating when it was floated in 2018, and the talk was about possibly lowering the threshold to the Three-Year Rule. In the end, the opposite happened, and five years has been extended to six. So that’s what that is all about.

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