Legal basis: Individual Income Tax Law of People's Republic of China (PRC).
Article 7 Individual income tax paid abroad may be deducted from the taxable income obtained by individual residents from outside China, but the deduction amount shall not exceed the taxable amount calculated by taxpayers' overseas income in accordance with the provisions of this Law.
Article 8 Under any of the following circumstances, the tax authorities have the right to make tax adjustments in a reasonable way: (1) business dealings between individuals and their related parties do not conform to the principle of independent transactions, and the tax payable by themselves or their related parties is reduced without justifiable reasons; (2) Enterprises controlled by individual residents, or enterprises established in countries (regions) where the actual tax burden controlled by individual residents is obviously low, do not distribute or reduce the profits belonging to individual residents without reasonable business needs; (three) individuals obtain improper tax benefits by implementing other arrangements that have no reasonable commercial purpose. The tax authorities shall make tax adjustments in accordance with the provisions of the preceding paragraph, and if it is necessary to pay back taxes, they shall pay back taxes and collect interest according to law.