Recently, many enterprises and foreign individuals are paying close attention to the changes in the personal income tax exemption policy of eight subsidies for foreign nationals working in China. Will the tax exemption subsidy policy be completely cancelled? What should foreign nationals and companies working in China do? We will parse this in this article.

According to the Notice of the State Administration of Taxation of the Ministry of Finance on the Convergence of Preferential Policies after the Revision of the Individual Income Tax Law (Caisong [2018] No. 164) :

1) During The period from January 1, 2019 to December 31, 2021, foreign individuals who meet the conditions of resident individuals can choose to enjoy special additional deductions for individual income tax, or they can choose to enjoy special additional deductions for individual income tax according to the Notice of the State Administration of Taxation of the Ministry of Finance on Certain Policy Issues concerning Individual Income Tax (Caisei [1994] No. 20). Enjoy the preferential policies of housing subsidy, language training fee, children's education fee, etc., but not enjoy the same time. Once selected by a foreign individual, it cannot be changed within a tax year.

2) From January 1, 2022, foreign individuals will no longer enjoy the preferential policies of tax exemption for housing subsidies, language training fees and children's education subsidies, but should enjoy special additional deductions according to regulations.

Analysis of the problem of subsidy for foreigners

01 Starting from January 1, 2022, the eight subsidy policies for foreign nationals will not be available, can only use special additional deduction?

According to article (2), No. 20 [1994] : "From January 1, 2022, foreign individuals will no longer enjoy the preferential policies of tax exemption for housing subsidies, language training fees and children's education subsidies, but shall enjoy special additional deductions according to the regulations." That is to say, housing subsidy, language training cost, children education cost these 3 did not have, only special additional deduction, and other subsidies, including food subsidy, relocation cost, laundry cost, domestic and foreign business trip subsidy, visit expenses these 5 can continue to enjoy temporary exemption from tax treatment. So the eight subsidies that have been in place for many years will become five subsidies.

02 Can enjoy special deduction and tax free subsidy policy at the same time?

At present, the two systems of eight tax-free subsidies and special deduction policies for foreign nationals are incompatible. One can choose to enjoy the foreign subsidy tax exemption policy or the special additional deduction regulations for individual income tax, but can not enjoy both at the same time, or enjoy half of each. Once selected by a foreign individual, it cannot be changed within a tax year.

03 Can foreign non-resident individuals also enjoy the tax exemption allowance for foreign nationals?

Foreign subsidy policy can be enjoyed by foreigners as long as they are "resident" or "non-resident". But special additional deduction policy, need "foreign individuals meet the individual conditions of residents" to enjoy, not non-residents. There is a difference in the audience.

How to control risks for enterprises?

From the perspective of enterprises, the responsibility division of the two policies is different. Special additional deduction is the information filled in by the employee, if there is any false, the responsibility is entirely on the individual. And foreign individual tax - free subsidies, because it is in the form of reimbursements or non - cash. The enterprise is responsible for controlling the compliance of invoices.

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