US Citizen in China wants to be paid in Canada

Last activity 26 April 2013 by James

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bodidlyMember11 March 2013 05:03:21

This is a complicated situation ill explain and hopefully you can give some input.

I am an American citizen that graduated from University in May 2011, soon after I moved to China where I have been studying chinese on a student Visa.

I just recently got hired by an international company here in China but have the following problems:

1. On a student visa I cannot legally collect income in China
2. In order to qualify for a working Visa I need to have 2 years of related working experience along with my diploma (right now I am 2 months short of the 2 year period)
3. The income tax for foreigners in China is a ridiculous 40% changing my moderate salary to a poor one.

Possible solution avenues:
1. The company has a sister company located in Canada. I could return to North America --> apply for a work permit as a US citizen to work in the Canadian company---> apply for a Business Visa for China (very temporary working permit ~6 months) --> return to China to work here... I could collect income in Canada and pay Canadian income taxes while still working here in China.

2. Work here in China for the next two months somewhat illegally. The company would pay me in terms of reimursement for things like rent, food, etc (anything i can get a receipt for) just so its not a direct salary. Then in 2 months I would qualify for the work permit and receive the promised salary's balance in the form of a signing bonus, then continue to collect the highly taxed income with a stipend in the form of continued reimbursements like before.

My thinking:
It would be great to collect income in Canada because it would be simpler to convert the money to U.S. dollars (Very difficult to do this with Chinese RMB) Also with the taxes lower, my real disposable salary would be higher.

However, there are other conveniences to working in China on a more stable working Visa (i.e. entry and exit of the country: the Business Visa will have restrictions on this) Also after reading these forums, I am concerned that the process of obtaining the Canadian work permit will be a huge hassle. I am fairly sure the company can take care of it for me, but it could be a long delay among other travel issues... Also the suggestion has not been posed to the Canadian company so our knowledge of that situation is basically limited to what I have found browsing websites and forums.

Does anyone have an experience with this type of tax dodging or strange visa requirement situation? Any suggestions I have not considered? How does my line of thinking sound?

ArmandViP11 March 2013 11:33:05

24785

Hi bodidly!

Welcome to Expat.com!
I hope the forum will be able to provide you some help.

Regards
Armand

HaileyinHongKongViP13 March 2013 12:00:34

4723

China doesn't like it when Americans work here illegally. If caught, that will be the end of your time in China.

JamesViP21 April 2013 03:32:36

11272

Not very likely that the Canadian company or their Chinese affiliate will be too keen on your proposals, since they violate both Canadian and Chinese laws regarding both Tax and Immigration.

I kind of think that the IRS back home will have something to say about it too.

HaileyinHongKongViP22 April 2013 15:58:58

4723

Can you imagine wanting to pay taxes in 3 different countries?

JamesViP22 April 2013 19:13:54

11272

No Hailey, I can't... paying taxes in Canada is bad enough. Higher than US tax rates and less deductions. Fortunately for me my Canadian retirement pension is less than my personal exemption so I get all the income taxes that are withheld refunded.

Oh and to answer your question about US taxes, if you renounce your citizenship you are no longer taxed in the USA. The downside is a multi-million dollar Exit Tax so it's only an option for the extremely wealthy, not us little fish. I understand that Tina Turner is the most recent addition to the list of American celebs to have renounced. LOL

Cheers,
James

HaileyinHongKongViP24 April 2013 16:41:55

4723

Elizabeth Taylor renounced her citizenship twice.

JamesViP24 April 2013 19:23:57

11272

HaileyinHongKong wrote:
Elizabeth Taylor renounced her citizenship twice.

Yeah, and she married eight times! Don't know if she ever did anything ONLY ONCE.

ChenJamesNew member25 April 2013 16:22:28

Hi bodidly
I understand your siutation working in china.The meeting which containing much limites has been promoted lately in china.It's strict in foreign company.so you should get some cerificate from the china goverment or your sister compang in cnada so that it's convenience for you in china.

JamesViP26 April 2013 14:15:00

#10

11272

Hi bodidly,

Have you really thought about the situation you are suggesting?

As a Canadian I can tell you that right off the top, if you are paid by a Canadian company - as a non-resident there is a 25% withholding tax that you will not be able to avoid.

Next, as an American citizen you should know that the USA is one of a few nations that bases their income taxes on citizenship and not on residency, so you're going to have to file a return with the IRS every year regardless of where you live and where you get paid. You must declare your total "WORLD INCOME" to the IRS and unless there is an existing tax treaty you may end up being taxed twice on your income.

It is also highly unlikely that you would be issued a Canadian Work Visa, if you were only going to be "farmed out" to a Chinese company by your so-called Canadian employer. I honestly think that Canada Customs & Immigration would simply say that you must apply through your Chinese employer for a Work Visa there.

You are going to be required to file an income tax return in China at any rate. You can be certain that any kind of remuneration, even non-monetary items like rent, meals, etc., are going to be considered taxable income so you're going to have to pay taxes on that too. There's no way around it.

I'd suggest that you just bite the bullet and apply for your Chinese Work Visa, get your pay there as you normally would and be done with it.

Cheers,
William James Woodward - Brazil Animator, Expat-blog Team

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