Retirement in China
Experiences - Banking - Taxation - Offshore Banking
Retirement in China ? A singular British viewpoint
A happy retirement in China for a British citizen - is it possible? Yes, I believe it is.
Yes, you really need a Chinese wife or husband to ease the process of longevity of stay.
Southern China is hot and warm respectively Summer and Winter when compared to the UK.
The summers are long, hot, invariably humid and sometimes wet. The winters warmer than the UK. So it’s a trade-off, air conditioner and maybe a de-humidifier instead of central heating. Although it is worth pointing out, the winters of 2008 and 2009 have been noted as being unusually cooler, with some daytime temperatures around 12 degrees and the nights around 4 degrees.
Cost of living - very cheap by comparison.
Standard of living - equally as good if not better, in my humble opinion.
Impecuniosity will not get the better of you as your £'s should go a long way.
Quality of life - For me, very good. Of course, that's only my subjective impression as I have not spent a lifetime here.
As other commentators are also quite rightly pointing out - there is a freedom in Asia that I find refreshing and often cathartic.
One might argue all these points of view but for me there is no doubt. I am still an anglophile at heart but I have found, what I consider to be, a better life here in China.
I might be over simplifying it I know, there are lots of other considerations to take into account.
A happy retirement in China for a British citizen - is it possible? - Yes, I believe it is.
Three Years down the road
Three and half years ago I became disillusioned with my life and I began to question my lifestyle. Did I need a big house, did I need 5 TVs, did I need 5 bedrooms, did I need a luxury car, and most importantly did I need to work hard and be away from home for more than 50% of my time just to maintain this lifestyle for myself? It was just one long round of working four or more days away from home at a time, earning good money but then paying it back to the government in taxation of one sort or another. But what about the thought of retiring? It was scary to contemplate such a big step: no income, no workplace camaraderie, no status, no purpose. Was it even possible? I calculated my finances on the back of a fag packet and consulted a friend who lived in Thailand. Seemed I would have just enough income to be self supporting for a few years. But I’d always been a workaholic; this would be completely alien to me.
By chance, a set of circumstances presented themselves which helped me make my decision. My ex-wife asked me for help because she was in debt and I gave a few hundred pounds, then my youngest daughter asked me for another few hundred pounds. Hang on – I’m working overtime to give money to other people who cannot manage to live within their means! Do I really need to earn so much money? My house, which had been up for sale, suddenly sold – if I could just find somewhere cheap to live I could use that money to supplement my income for the next few years. The penny dropped, the way was clear: I would do it, I would tell my boss on Monday morning that I was retiring. Monday morning came around and I broke the bombshell to my manager. “Sorry Graham, early retirement is not an option for you” he said. “That’s OK” I responded “Take three months notice instead, I’ve made my mind up that I’m leaving.” When he realised I was serious he arranged further discussions with the company and they allowed me to take early retirement and draw my retirement benefits.
As it happened, I was in contact with a lady in Nanning and I flew out to meet her. If things went well I would come back to Nanning when I finished at work, otherwise I would go to Malaysia. Either way it was bridge-burning time.
A few weeks later, I finally stood at Manchester airport with all my remaining worldly possessions packed into one 23 kilograms suitcase, a six kilograms carry-on bag and a briefcase full of documents. This was it – I was leaving the UK for an uncertain future. The following day I stepped off the plane at Nanning and my lady was waiting to greet me. Later she confided that she had told her boss not to employ anyone else to do her work until she rang him; if I did not arrive she would return to her old job! I wasn’t the only one stepping into the unknown.
Within four days I had rented a furnished apartment and settled in with my lady and her daughter. Later we married and bought an apartment of our own. And we are still together and happy.
Financially I am much better off than I thought I would be, partly because of the lower than budgetted cost of living in China, and partly as a result of higher interest rates in the West. I love the feeling of freedom I get from being retired and living in such a great country amongst wonderful people. I wouldn’t go back to my old lifestyle for all the tea in China.
Article provided by Graham.
Income Tax China - UK
This is my my own personal experience. I am an ex-pat now living in China and have been through this.
Firstly banking, I have got 2 current accounts at banks in the UK. The banks know my address in China but use an address in the UK for all correspondence. I use the internet for transactions and ATMs to withdraw money. These accounts operate under UK law. There does not seem to be any problem with this.
I also have offshore bank accounts to avoid UK taxation of money that arises outside of the EC. Note: even if the money arises outside the UK and is then brought back into your UK bank account it will be liable for UK tax if you haven't paid tax on it elsewhere. See later section - Offshore Banking
The tax issues are rather more involved:- When do you become an ex-pat? - The day after you leave the UK with intent to live permanently in another country?
Let's just stay with HM Revenue and Customs rules:
You will be seen as an Ex-pat by HM Revenue and Customs, providing:
a) your absence extends beyond 3 years from date of departure; and
b) the total number of days spent in the UK is less than 183 in any one UK tax year; and
c) the total number of days spent in the UK remains below 91 days per year on average.
Only then are you treated as being not resident and not ordinarily resident in the UK for UK income tax purposes, from the day after your departure.
Initially, your UK pension remains chargeable to UK tax. However, once you have met the above criteria, you may make a claim for your pension to be exempted from UK tax under the UK/China Double Taxation Agreement.
To allow you to make a claim, there is an appropriate form [The form is called DT/Individual. There is no reference number on my copy] obtainable from HMR&C.
This does not mean exemption will automatically be granted.
There is a section on the form that has to be certified by the Tax Authorities of China before the form is returned to HMR&C. If exemption is granted, it will make sure you are not charged tax on the same income in both countries.
Your UK pension will remain fully liable to UK tax until the exemption is granted. If exemption is granted then you will be liable for tax on that amount in China, as well as all future earnings.
If you decide not to go ahead with the claim, you should bear in mind that HMR&C may report to the authorities in China that you are in receipt of a pension which is taxable in China.
Now it depends on your individual circumstances and the amount of all your earnings and allowances.
You will need to calculate how much tax you would pay in both countries and then decide which country to pay it in.
In my case taxation was about the same amount in both countries, so I continue to pay UK tax on UK earnings.
It would be safe to assume at this time (March 2008) I'd pay almost exactly the same tax in China as in UK. About 20%
In China it appears that foreigners can earn 4800 rmb a month without paying income tax. Then there is a sliding scale of taxation starting at 5%.
Some of my earnings are interest payments arising in Hong Kong. I am deemed to pay tax there even though it is at zero rate. I pay UK tax on my UK earnings.
So in theory I have already paid all my dues on any money that I use inside China.
The little interest I receive from my accounts with Chinese mainland banks is taxed 10% at source.
The personal allowances in the UK are much higher than in China, or to put it another way, the point at which you begin to pay tax in China is much lower.
Quite often expats have cash deposits in interest bearing accounts.
If they use the interest to finance their expat lifestyle it is important to minimise taxation and retain as much as possible.
If the interest is generated in the UK it will normally be taxed 20% at source. Even if the interest arises outside the UK it will be liable for tax if it is brought back into the UK, for example if it is paid through your UK bank account.
Setting up an offshore bank is usually the same as opening a bank account in the UK. The only difference is that the law appertaining to that account will not be UK law, but will be the law of the country where the account/funds are located.
There are several points which are very important:
1. Open an account in a country that is politically and economically stable.
2. Use a bank of good repute. Remember, even banks can become insolvent and it is the investors who stand to lose their money. Northern Rock is a recent example, if the UK government had not stepped in and underwritten this, the depositors would not have been fully protected and could have received a maximum compensation payment that was far below their investment.
3. Consider having several accounts and/or using more than one banking company to minimise the risk and maximise compensation in the event of failure.
4. Use a bank that offers accounts in your choice of currency.
5. Don't just consider the bank that gives the highest rate of interest. You need to know their charges for managing the account and for transferring money. Read their terms carefully.
6. Taxation may be payable in the country in which the account is located, or there may be a retention tax if you are in the EC. Or it may be payable when you bring money into China.
To the best of my knowledge, all the big UK banks and Building Societies have associated offshore companies.
Your first point of call could be the places where your money is invested at the moment.
The offshore bank will be a different corporate entity so you will still have to provide evidence of identity, address, source of funds etc when you open the new account.
It is generally easier to open these accounts in person as the bankers are bound by the 'know your customer' rules but it can be done by post.
Personally I use HSBC International. My accounts are resident in Jersey but managed from Hong Kong.
My personal relationship manager is in Hong Kong and anything I need is managed by him.
One day HSBC may open a branch in Nanning and make life easy for us all!
REMEMBER: Tax avoidance is the minimising of tax liability using legal methods. Tax evasion has a similar objective but uses illegal means and is therefore a criminal offence with extensive penalties.
Article provided by Graham
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