@ JanJal: Nearly 50 years ago I took my first course in Taxation. First class, the professor wrote his name on the board then turned and announced, “Taxation is logical.” Perhaps he should have said, “There is a logic to taxation.”

I repeat: “1) As I would tell my Accounting students: Accounting and taxes are not about numbers but are about words, concepts, regulations, rules, laws, conventions and language. Accounting is not about numbers.”

Taxation is an element of state coercion. While on the face of it the purpose of taxation is to raise money for the state to use, it is also a means of coercing behavior to achieve the ends the state desires. In order to tax effectively, the state needs systems to monitor people and enterprises and apply its power to effect collection. This is the foundation of state taxation and can be considered universal regardless of ideology, political system or social system. In this foundation we begin to understand the logic of taxation.

Included in taxation logic are the words of Benjamin Franklin, “In this world nothing can be said to be certain, except death and taxes.”

There was once a day when an English teacher came to China, worked and was unconcerned with taxes. Her agent for calculating, collecting, reporting and remitting taxes was her employer.

“Take random English teacher considering a few years stay in China. He's not going to understand pedantic law texts.”

Ignorance may be bliss but the state wants it tax money. As the sophistication of China’s monitoring and information collection of people, especially expats, improves, not understanding tax law is no excuse when caught.

“Only if you assume that the tax authorities always follow the laws.”

A Tax Bureau is, as its name implies, bureaucratic in nature and has the mission to collect taxes. If you understood how your taxes get from your pocket through the system to Beijing, you would realize a) how foolish, and b) how risky this assumption this statement is. Quite simply, the Tax Bureau gets the first slice of you tax pie and passes what is left up the government chain.

In practice, each tax remittance, calculated and documented by the employer, is recalculated by the tax bureau. Any under collection is collected from the employer. Any over collection is retained and the correct amount is forwarded up the chain. The major effort is borne by the employer.

Why would you even think Tax Bureaus would forgo collecting taxes? Especially taxes from rich foreigners?

@JanJal:

1) As I would tell my Accounting students: Accounting and taxes are not about numbers but are about words, concepts, regulations, rules, laws, conventions and language. Accounting is not about numbers.

2) On August 31, 2018, the Amendment to the Individual Income Tax Law ("Individual Income Tax - IIT") was officially approved. Some of the regulations will be implemented from October 1, 2018 and the whole amendments will be implemented from January 1, 2019.

3) The officially approved Amendment does not address the "five-year rule." This has a serious impact the taxation of expats who live in China. The "five-year rule" provided expats a legal path to avoid paying China IIT on income sourced outside of China and completely unrelated to China.

4) Do not conflate the China IIT scheme, reformed, revised and approved, and the revised nexus the elimination of the "five-year rule" presents. There is a difference and, as best I can tell not holding a China license to advise or prepare IIT tax returns, the loss of the "five-year rule" creates a potentially huge impact on expats with income sourced outside China.

5) In the past, retirement income was not taxed. From Dezan Shira’s “China Briefing” January / February 2005: “Moreover, the tax bureau does also confirm that Foreign income derived from company or Government pension, is NOT taxable income in China.”

***Be aware, each Tax Bureau can, or could, make decisions independently from SAT and there was, in the past, a lack of consistency.

I cannot find a current, definitive answer for foreign sourced retirement income. I did find this (quoted with English errors, no corrections, see 1) above) September 07, 2018:

“For China tax resident, Currently the IIT law did not clearly state whether the pension abroad should be taxed in China.We’re hoping the upcoming release of the detailed IIT regulation will have a more detailed explanation on that.
For non-China tax resident , we would need to judge the situation according to the tax treaty signed with China – in most cases, for non-China tax residents, the pension would not need to be taxed in China.
As for your last question – there is no additional tax relief for pensioners, meaning Chinese retirees are not taxed”

www.sjgrand.cn/china-revised-individual-income-tax-law-2018/

6) This statement, aside from being unclear who is making it, is incorrect:

@Ishmael: "has no effect on expats staying here (with, for example, tourist visas) who are not employed".

In fact, the "five-year rule" specifically targets “expats staying” in China in order tax them even if they are “not employed.”

7) This statement is incorrect:

If such person manages to live in China without breaking the 5 year rule, then China will have legal basis to claim tax in worldwide income of said person.

The "five-year rule" is not a rule to be “broken.” It is an IF, Then, OR rule. Although it may no longer exist, "five-year rule" it was: IF an expat lived in China for five years, THEN China IIT tax must be paid on worldwide income beginning in year six, OR, the expat could spend at least 30 consecutive days outside China to reset the “five-year” period to avoid taxation on worldwide income.

The concept of a “legal basis to claim tax” tax is amusing. Tax laws, and regulations, stand as the basis to tax. They are the law.

8) Tax treaties, if any, between China and your home country also affect treatment of income sourced outside of China.

9) Sorry to be pedantic but these tax laws must be understood and followed. I am no expert on China’s IIT. The "five-year rule" affected me personally hence my interest. Each individual has his or her own set of facts which determines how he or she will be taxed. I offer only information and caution.

@JanJal: Thanks. This information is interesting. Thus far I have not seen any official documentation, nor have I seen any CPA firms clarify the five year rule.

Full disclosure: I have history with Dezan Shira and several years ago had some disagreement with the information they were publishing. At the time they had no lawyers, no Certified or Chartered accountants on staff but opined on law and accountancy. Be cautious using their information. That said, they appear to have grown substantially over the years and hopefully are better these days.

You can find the "BIO" of the founding partner here: www.dezshira.com/personnel/chris-devonshire-ellis.html

I hate to say it but the best Dragon Boat races I ever saw were in Long Beach, California. Lots of teams, some international, continual racing all day long. Big winner, and most impressive winner was the girls team from Shanghai. They beat everybody even the best men's team. Great fun!

@Liumingke1234 Both youku.com and www.tudou.com/ work fine with the VPN an the LA server with a very slight (1 sec ?) lag. Also amazon.cn and every Chinese government and university site work.

My internet connection sucks because, according to AlGore, I am under 3 meters of sea water.