Shamini 
(C): Twitter
As TikTok’s growth in the U.S. unfolds, it has fueled demands for tax compensation from more Chinese employees for the sizable cost of move. Those workers are now facing double tax, having to pay U.S. and Chinese taxes on the same income and ending up with total tax rates higher than 50% in some cases.
The complication arises from the fact that TikTok parent ByteDance Ltd. has stated they will enforce China’s global income tax laws, which require Chinese nationals to report and pay taxes on their worldwide income as residents of China. While these laws have been on the books for years, it is only recently that China has begun enforcement. In 2024, TikTok went through the renewal tax compliance policy process internally and required that all Chinese staff in the U.S. sign it. Employees say that they received no warning prior to the renewal of said tax compliance policy as per Bloomberg.
Unexpected Burden for Relocated Employees
As late as June, employees were told they were responsible for Chinese taxes on their U.S. income. Whereas the federal U.S. tax rate is capped at 37%, China’s tax can be as high as 45%. And, that does not include U.S. state taxes including those who live in high tax states like California, so some workers face effective tax rates of over 50%.
Those compensated partly in stock options were hit even harder because in many cases, no cash was offered to deal with the taxes. TikTok has tried to address the problem by offering loans and putting them in contact with tax experts to provide advice. However, because there was not early communication around the compensation agreements, it created frustration and a pushback for them to “pay” for any tax liabilities that exceeded China’s 45% ceiling.
Compliance Amid Geopolitical Pressure
The experts suggest that TikTok’s aggressive tax enforcement may be a tactic to prove regulatory compliance as political pressure builds in the U.S., including a possible national ban. TikTok has not publicly commented.
Nevertheless, there is a risk to employee morale and reluctance to relocate may grow without resolution.
Read Also: TikTok to Lay Off E-Commerce Staff Amid U.S. Uncertainty and Internal Restructuring
