The individual income tax benefits for foreigners, initially set to expire at the end of this year, will now continue until the end of 2027.
Foreign nationals who meet the criteria for tax residency in China (which refers to individuals who have domicile in China, or though without domicile but have resided for more than 183 days in total in China) now have a choice between two distinct tax advantages.
According to the updated guidelines, eligible individuals can either choose a special additional deduction for their personal income tax or follow the previously established regulations that provide tax-free benefits for housing allowances, language course fees, children’s education expenses, and other subsidies.
It’s crucial to note that these two benefits cannot be availed concurrently. Once an individual makes a selection, it remains unchangeable for the duration of that tax year.
This recent announcement confirms that this policy will remain in effect up to the end of December 2027, solidifying a long-term structure for the personal income tax strategy concerning subsidies for foreign nationals.
Recommendations for Companies
Companies employing foreign nationals should consider making HR and payroll policy adjustments in light of this extension. They should communicate with their employees to arrange benefits in line with the current policies. Companies that had made preparations for the original tax policy change might need to reconsider their decisions.
Extending the IIT preferential policy for foreigners showcases China’s strategic intent to attract and retain international talent. It also underscores China’s commitment to creating a favorable environment for foreign professionals and businesses.
Integra Group is a fully licensed asia-focused accounting, taxation, and business advisory firm – with dedicated offices in Shanghai, Beijing, Singapore and Taipei. We’ve helped companies ranging from Fortune 500 companies to small to medium sized businesses establish and grow their presence in Asia.
