Guide to Global Payroll Management - 2020 - C-9

Payroll Tax Summaries for Selected Countries
Severance pay that does not exceed one month's pay for each year of service is not
taxable. Gains on the sale of stock or the exercise of stock options in non-Chilean companies made by an expatriate within the first three years in Chile are not taxable. In addition,
employer-paid or reimbursed food, lodging and transportation expenses are not taxable if the
amounts are reasonable and provided solely for business purposes.

Tax rates
Income taxes. Current income tax rates for residents range from 0% to 35.5%.
Expatriates are subject to a flat 15% tax if the services are technical or engineering work,
or are professional services rendered through a report, advice, or plan development. Other
rates apply to other services.
Social security taxes. Employees make social security contributions at a rate of 17%,
computed on monthly salary capped at approximately $3,048.65 per month. Employers
contribute 0.95% of payroll as an accident insurance premium. In addition, there is a 3%
unemployment insurance contribution (employers pay 2.4% and employees pay 0.6%).
Expatriates are not subject to social security contributions.

Relief from double taxes
Chile does not have an income tax treaty with the U.S. Taxpayers receive a tax credit for
foreign income taxes paid, up to a rate of 15%. Any foreign taxes paid above the 15% rate
may be deducted as a tax expense.
Chile has a totalization agreement with the U.S (see Appendix B, page B-8).

CHINA

CHINA, PEOPLE'S REPUBLIC OF
Basis for tax
Residents of the People's Republic of China (PRC) are generally subject to tax on their
worldwide income, and nonresidents are taxable only on their PRC-source income.
Individuals who do not have a permanent home in the PRC but have resided there for
less than one year are subject to tax on PRC source income only; if they have resided there
for one year they are subject to tax on worldwide income for that year. However, with tax
authority approval, individuals who do not have a permanent home in the PRC but have
resided there for not more than five years are subject to tax on both China source income
and non-PRC source income to the extent the foreign source income is derived from individuals or businesses in the PRC. Those who reside in the PRC for more than five years
are subject to tax on worldwide income even if the income is not remitted to the PRC. In
general, employment income is PRC source if the work is performed in the PRC.

Residence rules
A resident is an individual who habitually resides in the PRC because of nationality, family ties or economic reasons. Residents include individuals who maintain a permanent home
in the PRC and individuals who do not maintain a home in the PRC but reside there for at
least one year (365 days during one calendar year). Temporary absences interrupt the calculation of days when determining residency. A temporary absence is defined as a single
absence from the PRC for up to 30 days, or multiple absences for an aggregate of up to 90
days within one tax year.

C-9

Guide to Global Payroll Management - 2020

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