Some Chinese employees at TikTok have requested compensation to address higher tax liabilities incurred after relocating to the United States.

Sources familiar with the matter indicate that the workers seek coverage for taxes that exceed the 45% cap imposed in China.

The employees argue that the additional tax burden could discourage Chinese staff from moving to the US.

It may also affect morale for those who have already relocated.

TikTok is reportedly in discussions with employees and consulting tax experts to address these concerns.

This issue arises as TikTok’s parent company, ByteDance, relocates more Chinese executives to US-based roles, particularly in its ecommerce division. ByteDance has declined to comment on the matter.

The tax complications stem from China’s enforcement of laws that require citizens to pay taxes on global income. Although these laws have existed for years, enforcement has intensified recently.

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🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ China’s global tax enforcement is part of a broader revenue recovery effort

TikTok’s tax compliance demands on overseas employees reflect China’s intensifying nationwide crackdown on tax avoidance that began years before this specific case.

China loses approximately $134 billion annually due to tax evasion, primarily from unreported transactions and disguised capital transfers to tax havens.

Since 2013, China has exchanged tax information with 46 nations after joining an international convention against tax evasion involving tax havens.

The collection of taxes from non-resident enterprises has more than tripled since 2008, reaching approximately $18.9 billion in 2013 alone, demonstrating the country’s increasing focus on capturing global income.

This tax enforcement push coincides with China’s efforts to boost fiscal income amid a property crisis and record budget deficits, making overseas income a logical target for revenue recovery.

2️⃣ Cross-border employment creates double taxation challenges for global workforces

TikTok’s situation highlights a persistent challenge in global workforce deployment: employees caught between two tax systems often face combined tax rates significantly higher than domestic workers.

Chinese employees relocated to high-tax US states like California can face effective tax rates exceeding 55% when combining China’s 45% maximum rate with state taxes over 10%, creating a substantial financial disincentive for international mobility.

While bilateral tax treaties exist to prevent double taxation, these agreements typically only address federal taxes and leave gaps that still expose employees to multiple layers of taxation.

The timing of tax payments creates additional complications, as evidenced by TikTok employees who received equity compensation and now must make large cash payments on unrealized gains within tight deadlines.

This tax complexity has become a significant barrier to talent mobility, with TikTok’s situation demonstrating how unaddressed tax issues can undermine strategically important international staffing initiatives.

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