Reforms to China’s preferential expat tax policies shelved

China has extended favourable income tax policies for expats in the country to 31 December 2023, the finance ministry has confirmed. Previously, China said benefits and allowances for foreigners, including housing rental, training, language courses and education for their children, would cease to be income tax-exempt starting this year. It was a move that prompted many international firms in the country to consider relocating. But due to pressure from these foreign businesses, the Ministry of Finance and the State Taxation Administration has announced the tax breaks will be extended for another two more years. In addition, year-end bonuses will not be included only in the month in which they are given but split evenly across 12 months, before 2024.

Income tax in China

Individuals who are resident in the mainland, or who live in China for a total of 183 days in a tax year, will be categorised as tax residents. However, only after remaining in the country for six consecutive years, without exiting for more than 30 days, will global income be taxed. Non-residents pay taxes based only on the income earned in China.

Expats in China

As a nation that is moving to refigure the global economy, mainland China “remains hungry for talented expats eager to accelerate in their career,” reports HSBC. “Mainland China is one of the best destinations in the world for people keen to climb quickly up the career ladder, and employers are offering salaries to match.” The most recent census showed that 845,697 foreigners are living in 31 provinces across mainland China, a significant rise compared with 593,832 a decade ago. The top 10 provinces in terms of expat population size were as follows: Guangdong had 418,509 people, Yunnan had 379,281 people, Shanghai had 163,954 people, Fujian had 106,248 people, Beijing had 62,812 persons, Jiangsu had 58,201 persons, Zhejiang had 46,189 people, Guangxi had 26,043 people, Shandong had 21,829 people, and Liaoning had 20,562 persons. The remaining 127,067 people resided in other provinces.

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