Ask Headmaster Ken

I have been working for a US company, managing their purchasing office here in Guangzhou. I currently have a work permit and Z-visa good through April 2010. I just quit my job to work on own, and I left on good terms.

Basically, I have been in Guangzhou for almost 2 years and I love being here. The company wanted to bring me back to the US full time. They knew I liked living here, so they gave me the option to return to the US and continue working, or to leave on good terms and stay here and do something else.

I have friends in the US that want me to source for them, and work with factories here on different projects. I have many contacts here, and I have good relations with many factories. I also want to send items back to the US to sell, an example is wood carvings. I have a registered company in the US and everything will be paid from the US side. I will receive no income here in China. My income will be from commissions and profits paid to me in the US. But I want to stay here the majority of the time.

My question is this: What are my options for staying here legally? Do I need to continue with a Z-visa? Can I get by with switching this to a business visa or is it going to be more complicated that that? I am also a little unclear about taxes. I want to get any apartment here and stay here for the majority of the year.

I just want to be able to stay here legally and work. I am just not sure the best way to do this.

Thanks and best wishes,

Kenny

Kenny,

Even though this is posted under Ken's forum, I'd like to answer it because I will be facing the same situation as yours in a few years.

A Z-visa is required of any foreigner who is earning income in China. The situation you describe would not require a Z-visa as your salary would technically be paid by your U.S. company. Even though your salary would still be technically paid by an American company, you are still eligible for the foreign earned income exclusion (up to $87,600) and housing exclusion because these are based on where the income is earned, not the source or location of the employer or even where the funds are deposited. For more information see the IRS bulletin Foreign Earned Income Exclusion.

Your best bet would be to approach one of your business contacts in Guangzhou about issuing a letter of invitation to you, as an employee of your company, to "cooperate" on some joint business venture. This legitimately qualifies you for an F-visa.

The other option is to ask one of your contacts to hire you on paper as a consultant. You would then qualify for a Z-visa and residency permit but it would be issued by the Ministry of Labor (alien work permit), not the Ministry of Foreign Expert Affairs (as is the case with foreign teachers).

Either way, I think you have very viable options here.

If Ken has any additional thoughts, I'm sure he will weigh in as well.

Thanks Dr. Greg. That is what I needed, some options to point me in the right direction. I will just need to decide if I want to go the F-visa route or the Z-visa. Either way is not a problem. I have good relations with some factories here. And also, I need to find out about taxes, what I can write off and cannot. My main goal is to be legal but also pay as little taxes as possible. Lots to look at on the link you gave me. I will study up more and let you know what I decide.

Thanks,

Kenny

If you're not realizing any business income here in China, and you have an American corporation, you could register a representative office of that corporation here in China and obtain a one-year, renewable, residence permit through that. Just be careful that you use the representative office's bank account for office expense funding only.

I don't know Guangzhou that well, but I'm sure you have a FESCO office there that can help you set up the rep office. Shouldn't cost that much. The only pain is dealing with the local and national tax bureaus. You'll have to pay excise taxes on whatever your rep office expenses amount to. You'll also have to pay personal income tax, and if you don't declare any the tax bureau will tax you anyway, assessing you at an income of around 20,000rmb per month. Taxes are the biggest headache. You'll need a Chinese bookkeeper to help you with that. Just make sure you keep the chops (office stamp and financial stamp) in your own possession.

You'll also need to rent an office here in China, you'll need a letter of reference from your bank in the U.S., and you'll need a certified copy of the articles of incorporation from your American company (usually certified by the State Dept). The FESCO office will give you a list of what you need.