Big news on the expat tax situation that has been the conversation du jour, and source of panic, for many a month now. For those not in the know, a proposed change to Individual Income Tax Law (IIT) would have seen the end of exemption allowances for foreign residents in China.
Well good news, as it has been postponed until the end of 2023.
On December 31, 2021 – the very eve of implementation – the Ministry of Finance and the State Administration of Taxation issued Circular No. 43 on the Continuation of the Preferential Policies on Individual Income Taxes such as Foreign Personal Allowances and Subsidies, declaring that the tax-exempt benefits for foreign nationals will be extended to December 31, 2023.
The tax-exempt benefits are divided into eight categories:
School Fees for Children
Foreigners living in China and holding a work visa can enjoy a reduction in their IIT for fees going towards these eight categories, and will now continue to be able to do so for another two years.
In other good news, changes were to be made so that an annual one-time bonus would have to be combined with yearly income, and therefore IIT paid on said bonus. However, it has been announced that one-time annual bonuses can continue to be taxed separately – at a preferential rate – until December 31, 2023.
Sighs of relief all around.
[Cover image via Flickr]