That said, if you are going to work for a reputable company or organisation here in China, then they should make sure your tax affairs are in order but like most things in life here, it can often be a mistake if you rely too heavily on others.
Things are changing quickly in China, it's the nature of the beast and with the advance in communication technologies and the desire to regulate it is likely that sooner rather than later the 'checking' process will be in place for Expats and Foreigners.
Don't ever forget "what was true yesterday may not be true today and what is true today may not be true tomorrow"
Latest update - Nov 2011
In June of 2011, the draft of the "Provisional Measures for Foreigners Working in China regarding Participation in the Social Insurance Scheme" was publicly released, stating that starting from July 1st, foreigners would have to pay into the Chinese social security system, and consequently sparked worries about what that exactly meant and whether or not we could opt out of it. Just a few months later, on September 6th, 2011, despite our hopes that it would simply disappear, the China’s Ministry of Human Resources and Social Security issued the "Final Provisional Measures" which will take effect starting on October 15th, 2011. While the "Final Provisional Measures" cleared up a few of the initial ambiguities about how exactly foreigners would pay into China’s social insurance system, many foreigners are still very sceptical about the actual benefits they can derive from contributing, and since this final draft still leaves many questions unanswered, it does little to quell anyone’s resentment. Given the complexity of the situation, and though it remains to be seen how this policy will take shape or form, it is important that foreigners working in China understand the "who, what, when, why etc." of what is about to happen. http://www.echinacities.com/expat-corner/a-foreigner-s-guide-to-the-new-mandatory-social-insurance.html
Taxation in China for the Individual
IIT (Individual Income Tax)
There has unfortunately been a lot of nonsense spoken about registering for individual income tax in China, how much to pay, being paid partially overseas, actually working here but consistently on tourist visas and so on that the real picture over registering for, assessing liabilities and the payment of IIT in China has become rather muddled. Ask one expatriate, then ask another, and they will give you different opinions. However unfortunately, expatriates do not decide China's tax regulations. Neither is the situation short of clarity in the eyes of China's tax bureau, who are quite clear on the subject and who are progressively clamping down on abuse of non-working visas and the under-declaration of income by foreigners in China.More...http://www.amcham-china.org.cn/amcham/upload/wysiwyg/20050705094941.pdf
Qualification for residence for an individual: Permanent residence in China while an individual who has no permanent residence in China but has lived in China for less than 5 years is taxed on his income in China, or overseas income that has its origins in China.
Individuals staying in China more than five tax years are taxed on their worldwide income too. (See Below)
Income Tax and Capital Gains Rates
China has a multi-tiered system of tax liabilities for foreigners, which has led to some confusion, particularly over the so-called 90 or 183 days rule. For those sent to China by a foreign company, who have their salary paid elsewhere (probably in their home country), and spend more than 183 days of a calendar year in China (or 90 if they are from a country that does not have a double tax treaty with China), they need to pay IIT (individual income tax) in China based on the number of days they effectively spent in the country.
New-to-China expatriates with full time employment here need to make sure they are in compliance. The onus is on the individual to ensure this and fines can be levied and passports censured if this is not carried out.
Newcomers need to obtain a work visa, residence permit and register for tax upon commencing or signing contracts.
The employer should arrange this for the employee.
This is a serious issue and only gets potentially worse every month it is ignored.
At some point, when an individual’s stay in China ends, they will have to reconcile with the authorities over their income. Immigration records, visa type and length of stay information are shared between the immigration authorities and the tax bureau.
The Chinese government regards individuals as tax residents when they have stayed in China for more than five years without residing outside the PRC for more than 90 days cumulatively each calendar year or 30 consecutive days within a single calendar year. A tax resident is required to pay IIT on their worldwide income without limitation of source, meaning that income elsewhere related to property rentals or interests will also needs to be declared to the Chinese tax authorities. The taxes paid overseas can be deducted from the taxes payable to the Chinese tax authorities.
Source and a must read: http://www.china-briefing.com/news/2010/01/12/expatriate-income-tax-planning-in-china.html