Implications of China’s Individual Income Tax Reform: IIT calculation, itemised deductions and expat allowances
Moore Stephens Advisory (MS Advisory) have published a worthy read for foreign workers in China. The article outlines the implications of China’s Individual Income Tax Reform which was release by China’s State Administration of Taxation (SAT) on 21 December, 2018.
Read the original article here
Summary
On 21 December 2018, China’s State Administration of Taxation (SAT) released the final draft to the IIT reform, providing further guidance on the procedures for itemized deductions (“Trial Implementation”), measures addressing the individual income tax withholding calculation and filing of individual income tax. MS Advisory has prepared a detailed article to explain the consequences of the IIT Reform.
IIT Reform timeline and changes
At the start of the transition period, from October 1st to December 31st of 2018, two changes to the Individual Income Tax Law came into effect.
Firstly, the standard deductions for both local (Chinese) and foreign employees was increased to RMB 5.000 per month. Secondly, the income tax brackets were adjusted.
The most recent updates to the IIT law extends on several changes highlighted in the previous announcements and provides further clarification.
This article highlights the following updates:
- Tax Residence in China – “Six-Year Rule”
- Individual Income Tax Calculation Method
- Itemized deductions for local employees (and foreign residents in China)
- Procedures for itemized deductions
- End of Expatriate Allowances – by 2022
- Annual Bonus Policy.
Following all the reforms and updates to China’s Individual Income Tax Law, it is clear that there will be significant impact on both local and foreign employees working in China.
The above updates in the relevant article provide an overview of the recent changes according to the new IIT Law effective by 1 January, 2019.
MS Advisory believe that "from experience with many other new laws and regulations in China, we will still have to wait to see how the central and local government will implement the new IIT regulations, and what changes we can still expect."
For more information, visit the MS Advisory website. or you can contact them directly at info@msadvisory.com.
