Investing in China can be influenced by various factors, including tax incentives and subsidies provided to expatriates in regions like the Greater Bay Area (GBA). The Chinese government has been implementing initiatives to attract foreign talent and foreign direct investments to the GBA by offering tax subsidies and incentives to eligible expats.
China’s Ministry of Finance (MOF) and State Tax Administration (STA) implemented the GBA IIT subsidy in 2019, aiming to attract oversea talents to the GBA. However, the policy was suspended in 2022 due to the budget burden caused by COVID-19 prevention and control.
On August 25, 2023, MOF issued the Circular on Continuing the Preferential Individual Income Tax Policies (IIT) in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), announcing that the preferential IIT policies will be extended until December 31, 2027.
1. What is the IIT Refund Policy?
Under the GBA IIT refund or subsidy program, the portion of IIT that an eligible person has paid in one of the nine GBA cities in mainland (Guangzhou, Shenzhen, Zhuhai, Dongguan, Foshan, Huizhou, Jiangmen, Zhaoqing, Zhongshan) and which is in excess of the first 15% of their taxable income can be refunded by the municipal government where he/she works at. This subsidy is also exempt from further IIT. The IIT subsidy is capped at RMB 5 million for each taxpayer in a given tax year.
2. Who can apply?
Not every expat who is working and living in the nine GBA cities are eligible for the IIT subsidy, the general requirements are:
1) Being one of the followings: a permanent resident of Hong Kong and Macau, a Hong Kong resident who has obtained residency through a Hong Kong entry program (for talent, professionals, and entrepreneurs), a resident of the Taiwan region, a foreign national, a mainland Chinese returnee, or overseas Chinese who has obtained long-term residence abroad;
2) Working in one of the nine GBA cities in mainland, and pay taxes there according to law (some of the cities require a certain period of time working in the city, e.g. at least 90 days for Guangzhou);
3) Abide by laws and regulations, scientific research ethics, and scientific research integrity;
4) Meeting the requirements of the catalogs of overseas high-end talents and in-demand talents of the respective city.
In addition to the general requirements, each city also has their specific additional requirements on the eligibility, which is to be published by the local municipal government.
3. How to Apply?
The GBA IIT refund is supposed to be processed once a year. The dates of the application window are set each year by each municipal government. So far, among the nine GBA cities, only Shenzhen had opened the application and already closed by Oct 20 2023. Other cities haven’t issued the specific guidelines for the application yet. We will continue to monitor the release of further guidelines other eight GBA cities.
If you’d like to know more about the GBA IIT refund policy, or want to be updated on the further guidelines for application from the GBA cities, please send an email to info@dandreapartners.com.
D’Andrea & Partners Legal Counsel and PHC Advisory Tax & Accounting (companies of DP Group) offer full-scale legal compliance, tax advisory support and consultancy to address any concerns related to this issue. If you have any inquiries, you are welcome to contact us: info@dpgroup.biz.
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The above content is provided for informational purposes only. The provision of this article does not create an attorney-client relationship between DP Group and the reader and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case, and the contents of this article are not a substitute for legal counsel.
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