If you still have questions after reading this, or if the subject touches your own interests, I suggest consulting a legal professional or the tax authorities. I also ask any professionals who read this to review and correct it where they can, so that it does not mislead anyone.

Note, 2026: this piece was written in late 2018, before the implementing regulations of the Individual Income Tax Law were final. The final regulations and later tax announcements changed several of the provisions quoted here, so the analysis may no longer apply.

The Question

China's new Individual Income Tax Law (its seventh amendment) takes effect on 1 January 2019. As a Hong Kong drifter (港漂, a mainlander who has moved to Hong Kong to work), someone who grew up in mainland China, holds mainland household registration/passport, has a job only in Hong Kong (IANG/Work Visa), has no spouse or children, and has long lived in rented housing in Hong Kong: on the fixed salary from their job in Hong Kong, besides paying Salaries Tax in Hong Kong, does such a person need to pay mainland individual income tax?

Because this question bears so directly on my own interests, and a short round of searching did not turn up a satisfying answer, I spent some time researching it myself. Since I have no professional training in the black hole that is law, all I can say is that I came away understanding a lot more than before I started, but still very little.

Below I first list the legal documents I consulted during the research, then excerpt the relevant parts of those documents, with the key parts in bold so readers can analyse and understand them for themselves, and finally give my own detailed analysis and summary, along with some related concepts I came across along the way.

Reference Documents

Excerpts from the Reference Documents

(The excerpts below are translated here from the Chinese texts, using the terms of the official English versions. Article 1 of the law is quoted from the National People's Congress's English translation; the Inland Revenue Department also publishes an English text of the Arrangement. The bold is the author's.)

1. Individual Income Tax Law of the People's Republic of China (7th amendment, 2018), excerpt

Article 1 An individual who is domiciled in China, or an individual who is not domiciled in China but has resided in China for an aggregate of 183 days or more within a tax year, shall be regarded as a resident individual. Income received by a resident individual from within China or overseas shall be subject to individual income tax pursuant to the provisions of this Law.

An individual who is not domiciled in China and does not reside in China, or an individual who is not domiciled in China but has resided in China for less than an accumulated 183 days within a tax year, shall be regarded as a non-resident individual. Income received by a non-resident individual from within China shall be subject to individual income tax pursuant to the provisions of this Law.

A tax year shall start from January 1 and end on December 31 within a calendar year.

2. Regulations for the Implementation of the Individual Income Tax Law of the People's Republic of China (Revised Draft for Comment) (October 2018), excerpt

Article 2 "Domiciled in China" in Article 1 of the Individual Income Tax Law means habitually residing in China by reason of household registration, family or economic interests; income obtained from within China and from outside China means, respectively, income sourced from within China and income sourced from outside China.

Article 4 A resident individual not domiciled in China who has resided in China for an aggregate of 183 days in each of fewer than five consecutive years, or in each of five or more such years but with a single departure of more than 30 days during that period, may, on filing with the competent tax authority, pay individual income tax on their income sourced from outside China only on the portion paid by enterprises, public institutions and other economic organisations in China or by resident individuals; a taxpayer who has resided in China for an aggregate of 183 days in each of five consecutive years, with no single departure of more than 30 days within those five years, shall, from the sixth year on, in any year in which they reside in China for an aggregate of 183 days, pay individual income tax on all of their income sourced from outside China.

Article 5 An individual who is not domiciled in China and who resides in China for a consecutive or aggregate period of no more than 90 days in a tax year shall be exempt from individual income tax on the portion of their income sourced from within China that is paid by an employer outside China and not borne by that employer's establishment or place of business in China.

3. Interpreting Tax Treaty Provisions, Part 2 (2015), excerpt

Countries usually follow these standards in determining the residence status of natural persons:

The domicile standard

Domicile generally means a person's fixed or permanent place of residence.

The residence standard

Residence usually means a place where a person has lived continuously for a fairly long time but does not intend to live permanently. Compared with domicile, residence has two features: first, the fact of having lived there for a fairly long time; second, no intention of living there permanently.

Because countries' laws differ, a natural person may be regarded as a tax resident by two countries at the same time. Tax treaties do not wish to see this happen, so Article 2 provides that "tie-breaker rules" are to be applied to decide which country the person is a tax resident of. It should be pointed out in particular that these rules are applied in descending order. That is, a later standard is used only when the one before it cannot resolve the question. These ordered standards are:

1. Permanent home

A permanent home includes any form of home, such as a house or flat rented by the individual, or a rented room, but the home must be permanent, that is, the individual has arranged to live there long term, rather than staying temporarily for some reason (such as tourism or a business trip).

2. Centre of vital interests

The centre of vital interests is judged overall, with reference to factors such as the individual's family and social relations, occupation, political, cultural and other activities, place of business and the place from which their property is managed. Particular weight is given to the individual's conduct: the country in which an individual has always lived and worked and has family and property is usually where their centre of vital interests lies.

3. Habitual abode

The habitual abode standard is used to decide an individual's residence in either of two situations: first, the individual has a permanent home in both contracting states, and the state in which their centre of vital economic interests lies cannot be determined; second, the individual's permanent home is in neither contracting state, for example an individual who keeps moving between hotels in one contracting state and the other. In the first situation, deciding the habitual abode means looking at how long the person stays at the permanent home on each side, while also taking into account the time spent at different places in the same country; in the second, all the time the person stays in one country is added together, whatever the reasons for the stays.

4. Nationality

If the individual has a habitual abode in both contracting states or in neither, their nationality is used as the standard for deciding residence.

When the standards above, applied in turn, still cannot determine the individual's status, the competent authorities of the two contracting states may resolve it by mutual agreement under the procedure in Article 24 of the treaty.

If a company or other body is regarded as a resident by both contracting states, which state it is resident in is decided by where its "place of effective management" is. If the two contracting states cannot agree because they apply different standards in deciding the place of effective management, the matter is to be resolved by mutual agreement.

4. Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (2006), excerpt

Article 4 Resident

1. For the purposes of this Arrangement, the term "resident of One Side" means:
(1) in the Mainland, any person who, under the laws of the Mainland, is liable to tax therein by reason of his domicile, residence, place of head office, place of effective management or any other criterion of a similar nature. This term, however, does not include any person who is liable to tax in the Mainland in respect only of income from sources in the Mainland;
(2) in the Hong Kong Special Administrative Region:

  1. an individual who ordinarily resides in the Hong Kong Special Administrative Region;
  2. an individual who stays in the Hong Kong Special Administrative Region for more than 180 days during a year of assessment or for more than 300 days in two consecutive years of assessment (one of which is the relevant year of assessment);
  3. a company incorporated in the Hong Kong Special Administrative Region, or, if incorporated outside the Hong Kong Special Administrative Region, being normally managed or controlled in the Hong Kong Special Administrative Region;
  4. any other person constituted under the laws of the Hong Kong Special Administrative Region, or, if constituted outside the Hong Kong Special Administrative Region, being normally managed or controlled in the Hong Kong Special Administrative Region.

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Sides, his status shall be determined as follows:
(1) he shall be deemed to be a resident of the Side in which he has a permanent home; if he has a permanent home in both Sides, he shall be deemed to be a resident of the Side with which his personal and economic relations are closer (centre of vital interests);
(2) if the Side in which he has his centre of vital interests cannot be determined, or if he does not have a permanent home in either Side, he shall be deemed to be a resident of the Side in which he has an habitual abode;
(3) if he has an habitual abode in both Sides or in neither of them, the competent authorities of both Sides shall resolve the matter by mutual agreement.

3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Sides, it shall be deemed to be a resident of the Side in which its place of effective management is situated.

Article 14 Income from Employment

1. Subject to the provisions of Articles 15, 17, 18, 19 and 20, salaries, wages and other similar remuneration derived by a resident of One Side in respect of an employment shall be taxable only in that One Side unless the employment is exercised in the Other Side. If the employment is exercised in the Other Side, such remuneration as is derived therefrom may be taxed in that Other Side.

2. Notwithstanding the provisions of paragraph 1 of this Article, remuneration derived by a resident of One Side in respect of an employment exercised in the Other Side shall be taxable only in that One Side if all the following three conditions are satisfied:
(1) the recipient is present in the Other Side for a period or periods, consecutive or in the aggregate, not exceeding 183 days in any twelve-month period commencing or ending in the taxable year concerned;
(2) the remuneration is paid by, or on behalf of, an employer who is not a resident of the Other Side;
(3) the remuneration is not borne by a permanent establishment which the employer has in the Other Side.

3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship, an aircraft or a land transport vehicle operated in shipping, air and land transport by an enterprise of One Side shall be taxable only in that One Side.

Analysis and Summary

Tax Residence Status

For natural persons, whether they count as (tax) residents of the Mainland and of Hong Kong has a decisive effect on whether their personal income is taxed.

To keep the discussion from getting too broad, I'll limit it here to whether a natural person meets two statuses: Mainland (tax) resident and Hong Kong (tax) resident. For mainland individual income tax, that gives four cases:

  • Mainland resident AND not a Hong Kong resident: pays mainland individual income tax on the terms for Mainland residents
  • Not a Mainland resident AND not a Hong Kong resident: pays mainland individual income tax on the terms for non-residents of the Mainland, with some allowances (under the Draft Amendment to the Implementing Regulations of China's Individual Income Tax Law (October 2018); the relevant document has not yet been formally issued, and the revised draft is the second document in the excerpts above)
  • Not a Mainland resident AND a Hong Kong resident: as above
  • Mainland resident AND Hong Kong resident: it will first be further determined whether you are a Mainland (tax) resident, which I'll go into in detail below

How Tax Residence Is Determined

Under Article 1 of the Individual Income Tax Law of China (2018), there are two sufficient conditions for being a resident (meeting either one makes you a resident):

  • an individual who is domiciled in China
  • an individual who has resided in China for an aggregate of 183 days within a tax year

A Hong Kong drifter probably won't live in the Mainland for more than half a year, and if so, the key question is the definition of being domiciled.

Article 2 of the Draft Amendment to the Implementing Regulations of China's Individual Income Tax Law (October 2018) states: "domiciled in China" in Article 1 of the Individual Income Tax Law means habitually residing in China by reason of household registration, family or economic interests.

Setting aside for now how vague "economic interests" is, "household registration" and "family" alone firmly establish us as "domiciled", and so make us Mainland residents. Reportedly the formal document will change "household registration" to "passport", and then there'd be even less escaping it.

On the Hong Kong side, the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (2006) defines a resident as:

  • an individual who ordinarily resides in the Hong Kong Special Administrative Region;
  • an individual who stays in the Hong Kong Special Administrative Region for more than 180 days during a year of assessment or for more than 300 days in two consecutive years of assessment (one of which is the relevant year of assessment)

So we also meet the definition of a Hong Kong resident.

Now the two sides go head to head. As Interpreting Tax Treaty Provisions, Part 2 (2015) says, nobody wants to see a person holding residence on more than one side. To decide further which side's (tax) resident you are, the method is the tie-breaker rules mentioned both in Interpreting Tax Treaty Provisions, Part 2 (2015) and in the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (2006).

The tie-breaker rules are an ordered set of tests: permanent home -> centre of vital interests -> habitual residence -> nationality -> mutual agreement, and the job is to sort people like us, who can't be classified otherwise, into Mainland (tax) residents and Hong Kong (tax) residents. A test is considered only when the one before it fails.

First comes the permanent home, which Interpreting Tax Treaty Provisions, Part 2 (2015) defines as including any form of home, such as a house or flat rented by the individual, or a rented room, but the home must be permanent, that is, the individual has arranged to live there long term, rather than staying temporarily for some reason (such as tourism or a business trip). On that reading we do have a permanent home in Hong Kong. What about the Mainland side?

This raises the question of whether "being domiciled" and "permanent home" are the same concept, mentioned earlier. If they are not the same thing, then since we have no home in the Mainland where we live long term, we are not Mainland residents, so we are determined to be Hong Kong (tax) residents and pay individual income tax only on the Hong Kong side. The former case is lovely; the worry is the latter: if the two are in fact the same, then we have a permanent home on both sides, the tie can't be broken, and the contest goes on.

Next is the centre of vital interests. According to Interpreting Tax Treaty Provisions, Part 2 (2015), the centre of vital interests is judged overall, with reference to factors such as the individual's family and social relations, occupation, political, cultural and other activities, place of business and the place from which their property is managed. Particular weight is given to the individual's conduct: the country in which an individual has always lived and worked and has family and property is usually where their centre of vital interests lies.

This overall judgement looks a bit vague, but assuming that "particular weight" really means particular weight, then I think living + working + property is quite enough to put people like us on the Hong Kong side, while family is slightly tricky. As far as I know, family mainly concerns "marriage" and "parent–child relationships", and the parent–child relationship is an asymmetric one, that is, parent-to-child or child-to-parent. The strongest case is spouse, children and parents: whichever of them you have, if they are all on one side, you certainly get assigned to that side, no escaping it. In other cases there seems to be some room for interpretation.

I won't go into the remaining tests here. All in all, at this point I personally would give 80% confidence that we are Hong Kong (tax) residents and pay individual income tax only in Hong Kong.

Going Over It Once More

  • Conditions: grew up in the Mainland, holds mainland household registration/passport, works only in Hong Kong (IANG/Work Visa), no spouse or children, has long rented a home in Hong Kong ->
  • Meets the conditions for being both a Mainland (tax) resident and a Hong Kong (tax) resident ->
  • Apply the tie-breaker rules ->
  • Under the permanent home test, can be regarded as having a permanent home on both sides ->
  • Under the centre of vital interests test, the centre of vital interests is in Hong Kong, not the Mainland ->
  • Confirmed as a Hong Kong (tax) resident ->
  • Conclusion: individual income tax is levied only on the Hong Kong side

This is the limited conclusion I could reach within my limited abilities, for readers' reference only. In fact there are still many points I don't feel are nailed down, and every person's situation is different; analysing each individual case is painstaking work. Here are some questions I can think of, to show just how complicated this whole business is:

  • For these provisions to apply to us as individuals (that is, for us to benefit from them), do we have to file something first?
  • If I don't file a tax return in the Mainland in the first month of next year, but am later found to owe tax, does that become tax evasion, and what legal liability would follow?
  • How do these provisions relate to the so-called CRS (Common Reporting Standard)?
  • We've seen that renting a place on the other side for tourism or a business trip counts as a temporary stay and not as having a permanent home there. What about studying abroad?
  • Which side taxes a resident of one side on income earned on the other side (I have quoted some relevant provisions above but haven't studied them in detail)
  • Which side taxes a resident of one side employed by a company located on the other side (I have quoted some relevant provisions above but haven't studied them in detail)
  • The formal documents, such as the Regulations for the Implementation of the Individual Income Tax Law of the People's Republic of China, have not fully come out, but the Individual Income Tax Law of the People's Republic of China is about to take effect. Can we interpret how the law will be implemented from the historical versions of the former plus the latest version of the latter?
  • Where individual income tax is levied on one side only, how wide is its scope? Salary (wages), employment income, or something else?

So it bears repeating: if you still have questions after reading this, or if the subject touches your own interests, I suggest consulting a legal professional or the tax authorities. I also ask any professionals who read this to review and correct it where they can, so that it does not mislead anyone.

Related Concepts

A Digression

You can see that the whole process runs like this: first the versions of the documents, when they take effect, and more detailed supplementary explanations of how they are implemented; then the definitions of key concepts; then applying different rules to different concepts, and finally reaching a conclusion.

In theory these logical structures of the law could perhaps be expressed as a decision tree or a more complex graph structure; for example, the tie-breaker rules for deciding residence are a typical binary tree. In practice, though, it is quite a hassle, because the complexity of law comes from many places:

  • the complexity of the logical structure itself: layer upon layer of definitions, general cases and special cases, and many conditions of many types to consider
  • mapping legal text to logical structure: for now it all has to be parsed by hand (why else would legal advice be so expensive?)
  • conflicts between multiple standards and bridging them, for example cases involving several sovereign states, the order of precedence between laws and between provisions, and vague definitions and their reinterpretation
  • differences between legal systems: in systems that rely on case law, besides the legal text itself, you need to collect and understand case data

In the last few years I've seen some teams try to use natural language understanding and knowledge graphs to automate understanding of and reasoning about the law. It's very interesting, but the road is long and hard, and there is still much work to do.