Save article

Saved

 

News

China publishes new Individual Income Tax preferential policies in Greater Bay Area

Executive summary

Preferential Individual Income Tax (IIT) policies for the Guangdong-Hong Kong-Macau Greater Bay Area have recently been released, detailing the categories of individuals that would qualify for favorable tax treatment in the next five years. The policies are intended to attract talent working in foreign-investment enterprises in order to boost the development of the area. Additional details are expected to be provided in future tax regulations.

Key issues

On 14 March 2019, The Ministry of Finance (MOF) and the State Administration of Taxation (SAT) issued Caishui [2019] No. 31, which is a notice regarding the IIT preferential policies for the Guangdong-Hong Kong-Macau Greater Bay Area (“Circular 31”).

The key changes outlined in Circular 31 are summarized below.

  • Eligible individuals: Foreign high-end talent and talent in shortage including Hong Kong, Macau and Taiwanese residents that work in the Greater Bay Area (“the talents”)
  • Eligible Area: Nine cities in the Greater Bay Area and Pearl River Delta, Guangdong, (including Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing)
  • Preferential policies: Subsidies of IIT difference between mainland China and Hong Kong will be provided and such subsidies will be exempt from IIT
  • Eligible period: Five years from 1 January 2019 to 31 December 2023

EY’s observations

On 18 February 2019, the Outline of the development of Guangdong-Hong Kong-Macau Greater Bay Area was published (“the Outline”), which was a sign of the full implementation of the construction in the Greater Bay Area. Circular 31 further provides IIT preferential policies which will boost the development of the area following publication of the Outline. Since the IIT difference between mainland China and Hong Kong is quite significant, the implementation of the preferential policies will make the Greater Bay Area more attractive to talent working in foreign-investment enterprises (including multinational enterprises, regional headquarters of multinational enterprises) and domestic enterprises, which will boost the construction and development of the area.

From 2013, certain IIT preferential policies have been implemented in Qianhai (in Shenzhen) and Hengqin (in Zhuhai) respectively. The table includes a brief summary of the policies.

Category

Hengqin (in Zhuhai)

Qianhai (in Shenzhen)

Eligible employees

  • Individuals working in Hengqin who obtained Hong Kong or Macau permanent residency;
  • Individuals who work and live in Hengqin for 90 days or more in the relevant year; and
  • Individuals who pay IIT in Hengqin based on IIT Law
  • Foreign high-end talent and talent in shortage including Hong Kong, Macau and Taiwaneseresidents, overseas Chinese and students returning from abroad who have obtained permanent residence abroad
  • Individuals working in enterprises and related institutions in the key development industries such as financial, modern logistics, information services, scientific technology services and other professional service industries
  • Individuals working in Qianhai for 90 days or more in the relevant year; and
  • Individuals who pay IIT in Qianhai based on IIT Law

Qualified Income category

  • All taxable income category as stipulated by IIT Law
  • Income from wages and salaries, income from remuneration for personal services, author’s remuneration, royalty and income from business operating activities

IIT subsidy

  • Difference between IIT payment in Hengqin and the IIT liability calculated based on the Hong Kong or Macau tax regulations
  • IIT payment exceeding 15% of the taxable income

Preferential policies

  • Grant subsidy based on the IIT difference and offer IIT exempt treatment to the subsidy
  • Grant subsidy based on the IIT difference and offer IIT exempt treatment to the subsidy

Circular 31 has expanded the IIT preferential policies originally in the Hengqin New District of Zhuhai and the Qianhai Modern Service Industry Cooperation Zone of Shenzhen to the nine cities in the Greater Bay Area and Pearl River Delta, Guangdong. In the meantime, the relevant preferential IIT policies implemented in Hengqin and Qianhai were abolished since 1 January 2019.

The criteria of the talents and subsidy details in the Greater Bay Area mentioned in the circular will be further stipulated by Guangdong and Shenzhen governments. In this regard, detailed rules need to be issued by the government to define the criteria of talents, procedures, qualified income category and the IIT difference calculation method, etc.

Next steps

Employers and taxpayers in the Greater Bay area, as well as those who are interested in the preferential IIT policies, should ensure they are up to date with the developments regarding the talent criteria and the process for accessing the subsidy that will be issued by local governments under the policy. Please consult the local tax authorities for more information, where required.

If you have any queries or require advice in relation to the changes, please contact your local EY professional or one of the contacts below.

Download this alert as a PDF.

EYG no. 001594-19Gbl

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

TAGS

Font size

Tax topics >

No filter criteria selected.

Industries >

No filter criteria selected.

Countries >

No filter criteria selected.

 < Close

Connect

 < Close

Countries

 < Close

Tax topics

 < Close

Industries

 < Close

Regions

 < Close

0 articles have been saved