Things to Consider Before Quitting Your Job in China

Cancellation of the Work Permit
If you want to work in China as a foreigner, you must obtain a Work Permit before you start working. The Alien Work Permit is also the first document that must be canceled when you leave your job. Even if you simply change to a new employer in the same city, you must cancel your current Alien Work Permit before you can apply for a new Alien Work Permit from your new employer.Generally, the cancellation of an Alien Work Permit is handled by the employer. Documents required for the cancellation of an alien work permit includeAn original copy of the application form for cancellation of alien work permit

Original copy of the certificate of termination of employment, termination contract or other supporting documents to prove the reason for cancellation

Other documents required by the local government

It is important to cancel a work permit promptly after the termination of the employment relationship. In case of death, incapacity or early termination of the contract or employment relationship, the employer must apply to the competent authority for cancellation of the work permit within 10 working days.

Cancellation of Residence Permit for Foreigners
After receiving the certificate of cancellation of the Alien Work Permit, you can make an appointment to cancel your Alien Residence Permit at the Exit-Entry Administration Department of your local Public Security Bureau.The Residence Permit is a document that grants foreigners the right to reside in China and allows them to enter and leave the country periodically as needed.  Documents required for the cancellation of residence permit include

Residence Permit Application Form

Foreigner’s color photo and Chinese visa photo receipt

Applicant’s passport

Applicant’s Alien Work Permit

Certificate of Cancellation of Alien Work Permit

Temporary Residence Registration Form

Dismissal/Contract Termination Document

You must submit these documents in person. The authorities will normally issue you with a 30-day stay visa to allow you time to attend to your personal affairs.

Cancellation of Social security scheme  
Foreigners who leave China before reaching retirement age can have their social insurance personal account savings paid to them in a lump sum upon their written application to terminate their social insurance participation.When terminating your employment and leaving the country, you can apply to the local social security bureau in which you are enrolled to terminate your social insurance participation and settle the amount in your personal social insurance account. The part of your pension and medical insurance that you contributed as an individual, and a percentage of your employer’s contribution, is paid into your personal account. You can then withdraw the balance of the personal account in a lump sum after your employer has completed the required procedures.After the termination of the social insurance relationship, you can withdraw the balance from your personal pension insurance account. After that, your data will be synchronized with the Medical Insurance Bureau, after which you can withdraw the balance from your medical insurance personal account.   The documents required include:

The applicant’s passport

The applicant’s local bank card (recommend financial social security card)

Power of attorney (if applicable)

Individual income tax reconciliation
When a foreign employee joins a company, the human resources department usually pre-assesses the number of days the employee will stay in China throughout the year to determine the employee’s tax residency status. If the actual situation is not consistent with the pre-assessment, either the employer or the employee will need to perform a tax clearance and will be required to pay more (or less) tax, as the change in tax residency status will result in a different Individual Income Tax (IIT) tax liability.Foreign employees who reside in China for 183 days or more in a taxable year are resident taxpayers, while foreign employees who reside in China for less than 183 days in a taxable year are non-resident taxpayers. For resident taxpayers, the individual income tax on their comprehensive income (income from wages and salaries, remuneration for services, remuneration from articles and royalties) is calculated on an annual basis.For non-resident taxpayers, the individual income tax on different incomes is calculated separately each time or each month when the income is earned. The taxable income of a non-resident individual from wages and salaries is the balance after standardized deductions (RMB 5,000 per month) and other applicable deductions. The individual income tax rate for non-resident taxpayers is usually the same as that for resident taxpayers.

Therefore, if you are a resident taxpayer at the beginning of the year but have resided in China for less than 183 days cumulatively within a tax year when you leave China, your IIT will need to be re-calculated on a monthly basis.

This may result in you needing to pay more in tax. Conversely, if you were categorized as a non-resident taxpayer at the beginning of the year but have resided in China for 183 days or more cumulatively within a tax year when you leave China, your IIT needs to be re-calculated on the basis of annual comprehensive income as well. This may lead to you having to pay less tax.

Since the knowledge involved in IIT calculation for foreigners is relatively complicated, it is recommended that you apply for a QR Code in the IIT system at the local tax office and complete the registration in advance so you can make IIT adjustments via the online system if necessary.  The documents required include:

The applicant’s passport (for QR Code application)

QR Code for the IIT system (apply at the tax bureau)

The applicant’s local bank card

Moving out of any country takes a lot of time and planning to make sure things will go smoothly. Especially concerning your finances, it is critical that you must determine any tax refunds or accountabilities under China’s tax laws before leaving. Failure to do so may lead to unexpected consequences such as being blacklisted. Thus, you may not be able to return to China in the future.

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