 "Behind the scenes: TikTok’s Chinese employees fight for tax relief if they relocate to US")
Several TikTok employees in China have been asked to relocate to the US, but the staff in question have said they will only move if the company compensates the additional taxes they have to incur due to their relocation.
According to a report by Bloomberg, TikTok’s employees in China have urged ByteDance to cover the costs of any tax liabilities exceeding the 45 per cent cap that they will be subjected to in China for moving to the US. Sources have told the news outlet that employees will deny relocating to America in case TikTok rejects its proposal.
The company, meanwhile, is in talks with its employees over the situation and has been holding meetings with tax consultants to address their concerns.
TikTok parent company ByteDance Ltd. has been moving more Chinese executives into US-based roles, especially within the app’s e-commerce division, as it aims to replicate the success of similar shopping platforms in China.
Why is China taxing its overseas workers?
China requires its overseas employees to pay tax on their global income by law. However, it has only been a few months since this rule has been enforced on people working in other countries.
Meanwhile, TikTok changed its tax compliance policy earlier this year, requiring all its employees working in the US to pay taxes, sources told Bloomberg. Tax complications affecting a crucial segment of the workforce risk dampening morale among those already relocated and may deter others from moving overseas, further compounding challenges for TikTok and ByteDance.
An added burden
Chinese companies are not obligated to comply with the taxation law of the country, as they technically argue that they are not required to withhold taxes for staff of subsidiaries abroad.
Despite this loophole, TikTok notified some of its US-based workers that they needed to pay taxes at home, which caught many off guard and added a hole in their pockets. These employees were reportedly not told about the system before they were asked to relocate.
Impact Shorts
View AllAdding to the strain, only US federal taxes are exempt under bilateral tax treaties. As a result, employees must still pay additional Chinese taxes, which can reach up to 45 per cent, while the US federal tax rate is capped at 37 per cent. On top of that, state taxes, such as in California, can exceed 10 per cent, depending on income levels.
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