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Since 2003, Mertz-International Limited has been providing quality, personalized financial guidance to local individuals and businesses.

Mertz-International Limited ‘s expertise ranges from basic tax management and accounting services to more in-depth services such as audits, financial statements, and financial planning.

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article source: IRS website and other tax advisors

China's New Tax Reform: How Would It Affect You?  

This will take into effect 1st of January 2019.

   If you spend over 6 months per year in China, you  will have to pay tax on all forms of income received worldwide. From foreigners on tourist/business visas and work permits, to Chinese nationals, you are now included in this definition.    

These Are The Four Big Changes: 

1. New Definition For Tax Residence - World Wide Income Tax 

  • In the new proposed changes, it states that if you live in China for over 183 days during the year, you are now considered a resident for tax purposes, whether or not you have a resident permit.      
  • Note: You will be given a tax credit based on the tax you have already paid on that income. If the tax you pay on the income is less than China's requirement, then you will have to pay the difference to China. In the reverse case, where your taxes abroad are higher than China, then you will not have to pay China tax. 

2. Personal Deductions Allowed and New Deductible Items for Chinese Nationals and Work Permit Holders

  • As anticipated, the standard basic deduction is proposed to be slightly increased from RMB 3,500/ month to RMB 5,000/month (RMB 60,000/year).

         Here's The List Of Full Deductibles: 

  • Education expenses for children
  • Health care costs for serious illness
  • Expenses for further self-education
  • Housing loan interest
  • Housing Rent

​3. New General Tax Avoidance Law 

  • This rule will make it very difficult for individuals to use trust or offshore structure to avoid tax.

4. Tax Bracket Adjustment

  • The table below shows the current and proposed tax bracket for Comprehensive Income(Monthly): 

FOR AMERICANS: Since we have worldwide taxable income already, from our point of view, these new rules will have little to no influence on your taxable income as an American Citizen, however, we highly recommend starting or continuously contributing to your IRA and Health Savings Account to take advantage of the tax breaks there. 
If you have any questions,  or would like to get some advice with tax planning  from me on how best to structure your income, and affairs to avoid paying unecessary taxes for your 2018 tax return, feel free to reach me by scheduling a FREE Consultation. 

All the best, 

Michael Mertz, CPA, EMBA

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