Extension of Preferential IIT Policy for Expatriates

Jan 18 2024
SBA Stone Forest
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EXTENSION OF PREFERENTIAL IIT POLICY FOR EXPATRIATES
The extension of the tax exemption policy for expatriates concerning allowances and benefits remains a significant consideration for expatriates working in China. The policy extension aims to keep the individual income tax (“IIT”) burden stable for expatriates, contributing to the retention of valuable talent. This marks the second extension of the preferential IIT policy for expatriates, now extended for a duration of four years.

On 18 August 2023, the Ministry of Finance (MOF) and the State Taxation Administration (SAT) released an Announcement on Continued Implementation of Individual Income Tax Policies for Subsidies and Allowances for Foreign Individuals (MOF & SAT [2023] No. 29). This announcement extends the preferential IIT policy for tax exemption incentives related to expatriates’ allowances until 31 December 2027.

Expatriates who meet the criteria for resident individuals have the option to claim a special additional deduction or choose to enjoy tax exemption incentives for expatriates’ allowances, including housing allowance, language training fees, children’s education fee, etc. However, it is important to note that expatriates shall not simultaneously claim the special additional deduction and tax exemption incentives, and the chosen option shall remain unchanged within a calendar year.

The details of the changes to the preferential IIT policy for expatriates are outlined in the following table:

Document Name

Notice of the Ministry of Finance and the State Administration of Taxation on Issues Relating to Transition of Preferential Policies following the Revision of the Individual Income Tax Law

Announcement on the Continuation of the Implementation of Preferential Individual Income Tax Policies on Allowances and Subsidies for Foreign Individuals

Announcement on Continued Implementation of Individual Income Tax Policies for Subsidies and Allowances for Foreign Individuals

Release Date

27December 2018

31 December 2021

18 August 2023

Document Number

Cai Shui [2018] No. 164

MOF & SAT [2021] No. 43

MOF & SAT [2023] No. 29

Effective Date

1 January 2019 – 31 December 2021

1 January 2022 - 31 December 2023

1 January 2024 - 31 December 2027

Specific Article

Article 7

None

None


We would like to highlight the following information to the companies:

  • If the company has implemented the preferential IIT policy on allowances for expatriates previously, it is recommended that the company continues to do so in compliance with the requirements of the tax bureau, including but not limited to collecting the supporting documents or fapiaos.
  • If the company has not implemented the preferential IIT policy on allowances for expatriates previously or plans to phase out the policy, it is recommended that the company consider implementing or continuing to implement the preferential IIT policy for their expatriates.


CHINA UPDATES

Accounting and Taxation

  • Six new regions join All-Electric Invoice Pilot, with only Tibet remaining to join in Mainland China
    Since 1 November 2023, taxpayers in Qinghai Province have been carrying out a pilot project for digital and electronic tickets. Taxpayers using the electronic invoice service platform are the designated pilot participants, with the specific scope to be determined by the Qinghai Tax Bureau of the State Administration of Taxation. On 27 October, Beijing, Ningxia, Hunan, Qinghai, Anhui, and Shandong issued relevant announcements, officially commencing the pilot project for digital and electronic invoices since 1 November 2023. As of now, Tibet Autonomous Region is the only region among the 31 provinces (municipalities and regions) and the 5 planned municipalities (excluding Hong Kong, Macao and Taiwan) that has yet to implement the pilot program.
  • Continuation of Preferential VAT Policies for Second-Hand Car Sales
    In an effort to boost automobile consumption, the State Administration of Taxation (“SAT”) issued an Announcement on the implementation of Value Added Tax (“VAT”) preferential policies for the sales of second-hand car (Cai shui [2020] No. 17) on 8 April 2020. To further support the second-hand car industry, the SAT issued another Announcement (Cai shui [2023] No. 63) on 22 September 2023, extending the preferential tax policy.

    1) Where a taxpayer engaged in the distribution of second-hand vehicles sells the vehicles it purchased, VAT shall be levied at a reduced rate of 0.5% from the original 3%;
  • 2) For the purpose of this Announcement, the term "second-hand vehicles" refers to any vehicle that is traded, and whose ownership is transferred in the duration from the completion of the registration formalities to the date when the state compulsory discarding standards are satisfied. The specific scope shall be subject to the administrative measures for the circulation of second-hand vehicles as promulgated by the competent commerce department of the State Council;
    3) This Announcement is effective until 31 December 2027.
  • To further support the development of medical service agencies, the SAT issued an Announcement on the continuation of the implementation of VAT exemption policies for medical services (Caishui [2023] No. 63) on 22 September 2023.
    1) Prices charged by medical institutions, when entrusted by other medical institutions to provide the various services listed in the National Medical Service Price Project Standards, should not exceed the guidance pricing of medical services formulated by pricing authorities at or above the local level, and other health authorities can apply for the VAT preferential policy stipulated in Caishui [2016] No. 36;
    2) Free loan activities among group members (including the enterprise group) will be exempted from VAT;
    3) This Announcement is effective until 31 December 2027.

Human Resources

  • The Shanghai Human Resources and Social Security Bureau, along with four other departments, issued a trial opinion on the participation of interns and employees above the statutory retirement age in work injury insurance on 9 November 2023. This policy is effective from 1 December 2023, and remains valid until 30 November 2025.

    To meet the development requirements of the new era and with the aim of enhancing the work injury insurance system, protecting the legitimate rights and interests of employees, and mitigating the risk of work injury of employers, individuals above the statutory age and interns are eligible to participate in work injury insurance. In the event of accidents or occupational diseases during the insurance period, the identification of work injury, assessment of labour ability, and treatment covered by the work injury insurance fund shall adhere to the relevant provisions of the Regulations on Work Injury Insurance and the Measures of Shanghai Municipality for the Implementation of Work Injury Insurance.

Corporate Governance

  • China officially entered into force the Convention Abolishing the Requirement of Legalisation for Foreign Public Documents (abbreviated as Apostille Convention) on 7 November 2023. The Apostille Convention aims to simplify the procedures involved in the cross-border use of public documents.

    As of 7 November 2023, public documents issued by mainland China intended for use in other member countries will only require apostillation before being sent to their destination, eliminating the need for consular legalisation. Similarly, public documents issued by other member countries can also be used directly in Mainland China after obtaining an Apostille from the competent authorities, without needing to seek consular legalisation.

 

Contact Us

Tan Lee Lee
Head of China, China
tanleelee@sbasf.com

Rita Boyle
Director, Business Advisory, International Desk
ritaboyle@sbasf.con

Yeo Lee Soon
China Business Advisory, Singapore
yeoleesoon@sbasf.com