In order to reduce taxpayers’ load, China decided to extend the previous tax preferential policies related to the individual income tax. According to the announcement posted by the Ministry of Finance, the tax exemption policies on expatriate employee allowances in China will be extended to December 31, 2023.
source：szs.mof.gov.cn
According to the previous tax preferential policies, China granted foreign employees several non-taxable allowances like housing allowance, children’s tuition allowance, relocation allowance, language allowance and so on. If these policies had not been extended, the non-taxable allowances would end on 1st January 2022, and such benefits would become fully taxable. The cancellation of these tax preferential policies may result in a decrease of international assignments to China.
source：www.gov.cn
Attention
Foreigners cannot enjoy all the non-taxable allowances at the same time. Once they select a non-taxable allowance, they shall not change it within one tax year.
In fact, the non-taxable allowances are truly attractive for foreigners to work in China. If the tax preferential policies are canceled, the taxable income of foreign employees will dramatically increase, which will raise foreigners’ cost of living and also raise human resource costs for companies that employ foreign employees. Luckily, China extends the tax exemption policies on expatriate employee allowances, which will have positive impact on foreign investment.
In addition, the tax preferential policy that all employee bonuses are taxed separately at a preferential rate will also extend to the end of 2023. The policy benefits people working in China, helping them save money, for they will pay less individual income tax under this policy.
source：www.gov.cn
Zhang Lianqi, vice president of the Chinese Tax Institute, said, "Under the impact of the epidemic, the extension of the policy will help relieve the tax burden of taxpayers who rely mainly on wages and salaries, make the middle and low-income groups get more satisfaction, and boost consumption."
（source: Xinhua News Agency）
Both of these tax preferential policies are welcomed and appreciated by the American Chamber of Commerce in China and the European Chamber, for these policies will helps companies attract expatriate employees or high-level talents to China and better retain them. Besides, the tax preferential policies is beneficial to both foreigners working in China and companies that employ foreign employees. These policies not only help expatriate employees lighten their tax burden, but also help companies reduce their operational costs.
The extension of the tax preferential policies will continue to help China attract foreign investment and nurture an environment friendly to foreigners working in China.
According to the data released by the Ministry of Commerce, the utilised foreign direct investment (FDI) was US$173.48 billion in 2021, rose by 20.2 percent year-on-year.
At present, China are making great efforts to optimize the business environment, and there are various enterprise-friendly policies. Therefore, China will maintain its attractiveness to international investment.
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