Page 33 - Doing Business in China

TAXATION

According to the prevailing IIT regulations, the following fringe benefits received by expatriates are exempted
from individual income tax until the end of 2023, if certain conditions are met and approvals (where required)
are given based on the tax bureau’s requirements below:
• Housing, meal and laundry allowances received in a non-cash form or on a reimbursement basis
• Reimbursement of relocation expenses upon commencement or cessation of China assignment
• Home leave allowance—two trips per calendar year
• Allowances for language training and children’s education
• Mandatory social security benefits

Expatriates should provide the employer with valid invoices and other relevant supporting documents, and
the employer should retain them for the purpose of IIT exemption� Otherwise, the allowances mentioned
earlier should be combined with the base salary and subject to IIT accordingly�

c) Tax credit
Tax credit will be allowed on income tax paid by the individual (Chinese and resident taxpayers) outside
China for income derived by the individual outside China� However, the credit amount shall not exceed the
individual’s China income tax that would have been payable on the foreign-sourced income� The excess tax
credit (after offsetting the individual’s China income tax payable for that year) can be carried forward for a
maximum period of five years�

d) Assessment and administration
The tax year starts on 1 January and ends on 31 December�

IIT for comprehensive income will now be calculated on an annual rather than monthly basis for tax residents
according to the new IIT law�

However, withholding tax agents will continue to withhold tax and file the tax returns in advance on a monthly
basis�

All taxpayers are allowed a monthly deduction of RMB 5,000 with effect from 1 October 2018� The taxable
income, after the monthly deduction, will be taxed on a progressive basis at a rate ranging from 3% to 45%�

The employer is primarily
responsible for withholding
individual income tax
from employees� The tax
withheld shall be remitted
to the State Treasury
within 15 days after the end
of each month� Otherwise,
a late fee or penalties will
be imposed�

32
32 | SBA Stone Forest