![]() Instead of exempting from PRC IIT on the full amount of qualified BIK allowances, foreign individuals who reside in China for one full year could only enjoy the following itemized deductions if applicable: Similarly, severance payment will need to be taxed together with the individuals’ regular wage and salary income while the preferential treatment might be expired. Also, the IIT liability on such payment will be higher than adopting the current treatment. If the current preferential treatment will be suspended after the transition period, annual bonus payment will need to be combined with the individuals’ regular wage and salary income for PRC IIT purpose which will increase their tax burden.Įquity based incentive income will no longer be allowed to be treated as a separate income and should be added into the individuals’ regular wage and salary payment to calculate PRC IIT. Qualified foreign individuals who receive the following allowances from employers could be treated as non-taxable income and exempted from PRC IIT: Also, it is not required to added into the individual’s regular wage and salary income.īenefit-in-kind Allowances (“BIK”) entitled to foreign individuals Under current PRC IIT regulations, for one-off compensation payment received by an individual due to termination of employment relationship with the employer, only the portion in excess of 3 times of the city’s average salary of the previous year where the employer is located is taxable in China. Similar to the annual bonus, equity based incentive income granted by the employer which is a listed company in China or overseas, while relevant tax registration has been completed and approved by the local tax authority, could separate from regular wage and salary income to calculate PRC IIT. Annual bonuses can enjoy a lower tax rate by applying for the latter treatment. Individuals could choose to either add the annual bonus to their regular wage and salary income or treat it as a separate income for PRC IIT calculation purpose. ![]() ![]() The Ministry of Finance and State Administration of Taxation announced relevant preferential treatment policies during the transition period from 1 January 2019 to 31 December 2021 (“Circular 164”) on 27 December 2018. With the PRC Individual Income Tax (“IIT”) reform since 1 January 2019. Main PRC Individual Income Tax preferential treatment and updated trend
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