The Six-Year Rule for non-domiciled individuals
The Six-Year Rule is a special buffer rule for non-domiciled individuals who are tax residents in China by virtue of the 183-day test. It determines when their worldwide income becomes fully taxable in China. In short: a non-domiciled individual who is a resident for less than six consecutive years (or who breaks the chain) can still enjoy an exemption on foreign-sourced income paid by overseas entities or individuals; once the six-year chain is complete, worldwide income becomes fully taxable from the seventh year.
1. Core condition for the Six-Year Rule
For a non-domiciled individual who resides in China for 183 days or more in a tax year, the six-year rule applies as follows:
| Condition in the preceding six consecutive years | Tax treatment in the current tax year |
|---|---|
| In each of the six years, the individual resided 183 days or more in China, and in no year did a single departure exceed 30 days | Income from both within and outside China is subject to Chinese individual income tax (full worldwide taxation) |
| In any of the six years, residence was less than 183 days, or a single departure exceeded 30 days | Foreign-sourced income paid by overseas entities or individuals is exempt from Chinese IIT |
This is stated in the official Announcement on March of 2019 issued by the Ministry of Finance and the State Taxation Administration.
2. How “preceding six years” is counted
- The “preceding six years” means the six consecutive tax years immediately before the current tax year (i.e., year −1 to year −6).
- Crucially, the starting year for counting is 2019. Years before 2019 are disregarded (“cleared to zero”). Therefore, 2024 was the first year in which the six-year chain could potentially be completed (2019.1.–2024.12.31).
This transitional rule meant that all non-domiciled individuals enjoyed the foreign-income exemption through 2024, regardless of how long they had actually lived in China before 2019.
3. The “30-day reset” rule
If in any tax year during the six-year period the individual has a single departure from China exceeding 30 days, the continuous six-year count is broken and reset to zero. The counting starts anew from the following year.
This is a key planning point: a carefully timed single trip of more than 30 days can reset the clock and preserve the foreign-income exemption.
4. How residence days are counted
For the 183-day test (and for the six-year chain), days are counted as follows:
- A day on which the individual stays in China for 24 hours or more counts as one residence day.
- A day on which the individual stays less than 24 hours does not count as a residence day.
Example: A Hong Kong resident who commutes to Shenzhen every Monday morning and returns Friday evening—where Monday and Friday stays are each less than 24 hours—will have only 3 countable days per week (Tuesday, Wednesday, Thursday). Over 52 weeks, that is 156 days, below the 183-day threshold, so they would not be a resident individual at all.
5. The exemption and its procedural requirement
If the six-year chain is not completed, the foreign-sourced income exemption applies only if the individual files a record with the competent tax authority (备案). The exemption covers income sourced outside China and paid by overseas entities or individuals.
6. Practical illustration
Consider a non-domiciled individual who has been in China since 2019:
| Year | Days in China | Single departure >30 days? | Six-year chain status |
|---|---|---|---|
| 2019 | 210 | No | Year 1 |
| 2020 | 195 | No | Year 2 |
| 2021 | 185 | No | Year 3 |
| 2022 | 207 | No | Year 4 |
| 2023 | 184 | No | Year 5 |
| 2024 | 195 | No | Year 6 (chain complete) |
| 2025 | 200 | No | Worldwide income fully taxable |
If, instead, in 2023 the individual had taken a 35-day trip abroad, the chain would have reset. The six-year count would restart from 2024, and the foreign-income exemption would continue to apply in 2025.
Summary table
| Concept | Rule |
|---|---|
| Who it applies to | Non-domiciled individuals who are resident by the 183-day test |
| Effect of completing six years | Worldwide income becomes fully taxable from year 7 |
| Effect of not completing six years | Foreign-sourced income paid overseas is exempt (with filing) |
| Counting start date | 2019 (pre-2019 years disregarded) |
| Reset trigger | Any single departure exceeding 30 days in a tax year |
| Day counting | Only days with 24+ hours of stay count |
The Six-Year Rule is essentially a transitional safe harbour designed to give non-domiciled residents time to adjust before full worldwide taxation applies. It is separate from—and additional to—the domicile and 183-day tests that determine resident status in the first place.
ref link:
criteria for individuals to be considered chinese tax residents
关于在中国境内无住所的个人居住时间判定标准的公告
https://www.gov.cn/zhengce/zhengceku/2019-10/16/content_5440701.htm
Who should pay individual income tax
Criteria for Determining the Period of Residence of Individuals Without a Domicile in China
https://fgk.chinatax.gov.cn/eng/c102962/c102967/c102997/c103004/c5248304/content.html#1