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Expatriates’ Individual Income Tax Liability in the Greater Bay Area of China is Limited to 15%

The Notice on the Implementation of Preferential Policies for Individual Income Tax in Guangdong-Hong Kong- Macao Greater Bay Area (Yuecaishui [2019] No. 2) issued by Guangdong Provincial Bureau of Finance, State Administration of Taxation and Guangdong Provincial Taxation Bureau on July 24, 2019. This Notice clarify the purpose, applicable scope, content and application method of preferential policies and give further explanation of the Notice (Caishui [2019] No.31) issued this year.

1.      Background of Preferential Policies

For supporting the construction of the greater bay area, attracting overseas (including Hong Kong, Macao and Taiwan) talents and talents in short supply to work in the greater bay area, Ministry of Finance, State Administration of Taxation and Guangdong Provincial Taxation Bureau formulated individual income tax preferential policies, and give the subsidies to overseas high-end talents (including Hong Kong, Macao and Taiwan)  and talents in short supply according to the difference between the mainland and the Hong Kong individual income tax, and subsidies shall be exempted from individual income tax. The introduction of this policy has significantly reduced the actual tax burden of overseas talents working in the greater bay area and will play a positive role in guiding and promoting the talents aggregation in the greater bay area.

2.      Applicable Scope of Preferential Polities

The applicants must meet the following requirements:

(1)       Permanent residents of Hong Kong and Macao, Hong Kong residents who have obtained the Hong Kong Quality Migrant Admission Scheme (talents, professionals and entrepreneurs), residents of Taiwan, foreign nationals, or returned students and overseas Chinese who have obtained the right of permanent residence abroad;

(2)       Working in nine PRD municipalities (Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing);

(3)       Overseas high-end talents and talents in short supply, including:

a. Candidates of national, provincial and municipal major talent projects, or

b. Talents who obtained the "Guangdong Talented Card" or working permit for foreigners (class A) or confirmation letter of overseas high-end talents, or

c. Other high-level overseas talents identified by national, provincial and municipal governments;

d. The scientific research team member, institutions of higher education, scientific research institutions, hospitals and other relevant institutions of scientific research and technology team members of national, provincial, municipal major innovation platform, the backbone and excellent managerial talents who focus on developing industries and key areas in our province employment entrepreneurship skills, or

e. Other talents in short supply with special expertise identified by nine PRD municipalities.

3.      Content of Preferential Policies

(1)         Subsidies Standard

The amount of individual income tax paid in the nine PRD municipalities which exceeds the amount calculated by 15% of the taxable income shall be subsidized by the people's government of the nine PRD municipalities, which shall be exempted from individual income tax.

(2)         Income Items

a. Income of wages and salaries;

b. Income of remuneration for personal services;

c. Income of author's remuneration;

d. Income of royalties;

e. Income of business operations;

f. Subsidized income obtained from selected talent projects or talent projects.

(3)         Calculation of Subsidies

Subsidies shall be given once a year and calculated according to the above six individual income items (comprehensive calculation of comprehensive income) and consolidated subsidies for these items. For talents who have obtained the income of remuneration for personal services from 2 or more sources, the subsidies shall be shared and given according to the territorial principle.

Amount of Subsidies = IIT Paid in the Nine PRD Municipalities – Taxable Income * 15%

4.      Application of Preferential Policies

For identification of high-end talents and talents short in supply, may refers to the specific standards and operating method formulated by government of each municipalities. The high-end talents and talents short in supply who meet the requirements shall declare the subsidies in accordance with the principles of voluntary. The application may be submitted by the applicants themselves or the employing unit to the local financial department, and the employing unit submit the application shall be encouraged.

If the applicant is found to have violated laws and regulations or made false declaration, the applicant shall be disqualified from enjoying preferential policies after verification and shall be withdrawn the financial subsidy funds which have already issued. Where a crime is suspected, it shall be handed over to the judicial branch to be investigated for criminal responsibility according to law.

5.      Implementation of Preferential Policies

This Notice shall be implemented on January 1, 2019 for a trial period of one year.

Kaizen will continue to keep an eye on the talent identification standards and operating methods issued by nine PRC municipalities in the greater bay area of Guangdong, Hong Kong and Macao. Welcome to contact our professional accountants and tax accountants if you are interested in this preferential policy.

If you wish to obtain more information or assistance, please visit the official website of Kaizen CPA Limited at www.kaizencpa.com or contact us through the following and talk to our professionals:

Tel: +852 2341 1444

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