On 31st December 2021, the Ministry of Finance and the State Administration of Taxation of the People's Republic of China announced that the preferential tax treatment of fringe benefits for expatriates working in China will be extended to 31st December 2023.
The special treatment was due to expire at the end of 2021, which would have meant that these would become fully taxable from 2022, meaning housing allowance, school fees, home leave trips and other allowances would have been subject to taxable. The impact on expatriates of this would have been considerable, as pointed out in a recent article that we published. This extension, along with the other regional policies of tax rebates for key individuals to effectively reduce the tax burden, such as that in Shenzhen, is extremely good news and encouraging for expatriates and foreign businesses in China.
In order to retain, recruit and encourage foreign talent, companies can consider their remuneration structure for expatriates on how their packages are constructed. Companies should therefore look to review their remuneration structure from a compliance, tax optimisation and best practice perspective.