China (People’s Rep.): tax subsidy for foreign workers in Qianhai (Shenzhen) Modern Service Cooperation ZoneAugust 29, 2013
It has been reported that the Qianhai (Shenzhen) administration published the Implementation Rules of Provisional Measure on Tax Subsidy for high-level foreign Workers , on 13 August 2013.
The measure on the tax subsidy itself was released in January 2013, which states that qualifying foreign workers may receive a tax subsidy for their employment income in the Qianhai Modern Service Cooperation Zone from 1 January 2013 .
The implementation rules set out the requirements for the application of the subsidy.
The subsidiary is a grant of the local Government of Shenzhen and is intended to attract more foreign high-level workers in Qianhai by refunding the part of the individual income tax on employment income that exceeds 15%.
In other words, the individual income tax (IIT) marginal rate will be reduced to 15% for these qualifying foreign workers due to the subsidy.
The tax bureau will collect the IIT at the normal tax rates, ranging from 5% to 45%, depending on the amount of the taxable employment income, and those employing the qualifying foreign workers may apply for the refund of the paid IIT that exceeds 15% to the local government in the period between 1 January 2014 and 31 January 2014.
To be eligible for the subsidy, a foreign worker must:
- Be a foreign citizen or a Hong Kong, Macao or Taiwan resident, or an overseas Chinese/student with foreign permanent residence permit
- Be employed by an enterprise established in Qianhai and engaged in the qualifying businesses, such as financial, logistic, information, technical and other modern services
- Have worked consecutively for at least one year and for at least six months in the year for which the application for the subsidy is submitted
- Have paid IIT
In addition, the foreign worker must have one of the following qualifications:
- They are recognized as “high-level personnel,” by the state, provincial level or Shenzhen government agencies
- They hold a managerial or technical position at a headquarter of a recognized corporation, a Fortune 500 company or its branch in Qianhai
- They hold a mid- or high-level management or technical position at any other enterprise in Qianhai
- They possess an internationally recognized professional certificate or a patent that is urgently needed in China
The subsidy only applies to employment income, i.e., wages, salaries and other work-related taxable allowances.
Other income derived by the foreign worker, e.g., dividends, interest, royalties, rent or incidental income, is excluded from the subsidy.
According to the report, the subsidy will have an adverse effect on the finance of the Shenzhen Government if the scheme is successful, and the local government will evaluate the subsidy after one year to conclude whether it is financially sustainable.
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