{"id":9546,"date":"2025-12-01T07:45:33","date_gmt":"2025-12-01T07:45:33","guid":{"rendered":"https:\/\/msadvisory.com\/?p=301"},"modified":"2026-04-20T11:31:04","modified_gmt":"2026-04-20T11:31:04","slug":"china-preferential-iit-policy-foreigners","status":"publish","type":"post","link":"https:\/\/msadvisory.com\/china-preferential-iit-policy-foreigners\/","title":{"rendered":"Preferential IIT Policy for Foreigners"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"9546\" class=\"elementor elementor-9546\" data-elementor-post-type=\"post\">\n\t\t\t\t<div class=\"elementor-element elementor-element-3fc39fea e-flex e-con-boxed e-con e-parent\" data-id=\"3fc39fea\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-5edbcf0 key-takeaways elementor-widget elementor-widget-text-editor\" data-id=\"5edbcf0\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<h3>Key Takeaways<\/h3><ul><li>Historically, China has had a separate income tax policy for citizens and expats.\u00a0<\/li><li>Expats are entitled to a range of fringe benefits that reduce their income tax burden in China.\u00a0<\/li><li>With this preferential policy set to come to an end, it is crucial that expats in China seek expert advice on their individual income tax obligations going forward.\u00a0<\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-4411afc elementor-widget elementor-widget-text-editor\" data-id=\"4411afc\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p>Historically, China has allowed <a href=\"https:\/\/msadvisory.com\/expat-moving-to-china-guide\/\">expatriate employees<\/a> to lower their tax burden by claiming a portion of their salary as tax-exempt allowances. After deliberation from the State Taxation Administration (STA), <strong>the policy on non-taxable benefits has been extended, Ending on 31 December 2027.<\/strong><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-defc34d elementor-position-left elementor-vertical-align-middle elementor-position-top speak-expert-new elementor-widget elementor-widget-global elementor-global-41638 elementor-widget-image-box\" data-id=\"defc34d\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"image-box.default\">\n\t\t\t\t\t<div class=\"elementor-image-box-wrapper\"><figure class=\"elementor-image-box-img\"><a href=\"https:\/\/msadvisory.com\/contact\/\" tabindex=\"-1\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china.jpeg\" class=\"attachment-full size-full wp-image-21671\" alt=\"Shanghai China\" srcset=\"https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china.jpeg 1024w, https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china-300x169.jpeg 300w, https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china-768x432.jpeg 768w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure><div class=\"elementor-image-box-content\"><div class=\"elementor-image-box-title\"><a href=\"https:\/\/msadvisory.com\/contact\/\">Ask Your Questions to Our Experts<\/a><\/div><p class=\"elementor-image-box-description\">Send us your questions and we will answer within 24 hours\n<span>Message &nbsp;\u2192<\/span><\/p><\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-fdcfb6a elementor-widget elementor-widget-text-editor\" data-id=\"fdcfb6a\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<h2>What Is the Individual Income Tax (IIT) Preferential Policy for Fringe Benefits?<\/h2><p>According to China\u2019s Individual Income Tax (IIT) law, expatriates who qualify as tax residents are required to pay income tax on all their China sourced income. However, the State Administration on Taxation and Ministry of Finance implemented a policy, beginning in January of 2019, which provided certain fringe benefits for foreign tax residents in China.<\/p><p><em>According to Cai Shui (2018) No. 164,<\/em>\u00a0from 1 January 2019, foreign tax residents were entitled to some of the following tax-free fringe benefits:<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-0617b3b elementor-widget elementor-widget-text-editor\" data-id=\"0617b3b\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><img decoding=\"async\" class=\"alignnone wp-image-11291\" title=\"\" src=\"https:\/\/msadvisory.com\/wp-content\/uploads\/2022\/01\/Picture8.png\" alt=\"Picture8\" width=\"652\" height=\"524\" \/><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-7d2f7f6 elementor-widget elementor-widget-text-editor\" data-id=\"7d2f7f6\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p>These benefits could be exempt from taxes, provided that the expenses were reasonable, and they were accompanied by the <a href=\"https:\/\/msadvisory.com\/what-is-a-fapiao-the-invoicing-system-in-china-explained\/\">relevant supporting documentation<\/a> such as the fapiao, for each expense claimed. In principle there is no set amount that can be deducted, however Chinese law states that a reasonable amount may be deducted. In general, it is advisable that <strong>between 30% and 35% can be deducted<\/strong> from a foreign employee\u2019s monthly salary, in order to avoid any inquiries from the tax bureau.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-bce4034 elementor-widget elementor-widget-text-editor\" data-id=\"bce4034\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><a href=\"https:\/\/msadvisory.com\/resource\/special-tax-report\/\"><img decoding=\"async\" class=\"size-full wp-image-10792 aligncenter\" title=\"\" src=\"https:\/\/msadvisory.com\/wp-content\/uploads\/2023\/12\/Tax_Services_Ad_resized_final.png\" alt=\"Tax Services Ad resized final\" width=\"1000\" height=\"573\" \/><\/a><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-235b2b0 elementor-widget elementor-widget-text-editor\" data-id=\"235b2b0\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<h2>The Transition Period<\/h2><p>With the implementation of China\u2019s Individual Income Tax Law, the government intended to reduce the benefits received by foreign employees working in China and create an equal taxation system on foreigner and local taxpayers. Instead of an immediate implementation of this, the transition period was announced in\u00a0<em>Cai Shui (2018) No. 164\u00a0<\/em>\u2013 which applied from 1 January 2019.<\/p><p>The IIT law and subsequent notice,\u00a0<em>Cai Shui (2018) No. 164,\u00a0<\/em>applied to <a href=\"https:\/\/msadvisory.com\/china-foreign-permanent-resident-id-card\/\" data-wpil-monitor-id=\"630\">foreign employees who reside in China<\/a>. During the transition period, foreign tax residents have the option of choosing either:<\/p><p><strong>1. The Additional Itemized Deductions<\/strong><\/p><p>Which allows for deductions on these six items:<\/p><ul><li>Children\u2019s education costs<\/li><li>Further education costs<\/li><li>Housing mortgage interest<\/li><li>Housing rental expense<\/li><li>Healthcare expenses for serious illness<\/li><li>Costs for taking care of the elderly<\/li><\/ul><p><strong>2. The Tax-exempt Benefits<\/strong><\/p><p>As mentioned above:<\/p><ul><li>Housing rental<\/li><li>Children\u2019s education expenses<\/li><li>Language training expenses<\/li><li>Home-leave flights<\/li><li>Meal and Laundry expenses<\/li><li>Relocation expenses<\/li><\/ul><p>This transition period has been extended multiple times, and is now <strong>due to end on 31 December 2027<\/strong>. After this point, expats will only be eligible for the itemized deductions.\u00a0<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-4ddcc57 elementor-widget elementor-widget-text-editor\" data-id=\"4ddcc57\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><strong>Comparison \u2013 Itemized Deductions vs Tax-Exempt Benefits (Expats)<\/strong><\/p><table><tbody><tr><th>Category<\/th><th>Itemized Deductions (Post-2027)<\/th><th>Tax-Exempt Benefits (Until 2027)<\/th><\/tr><tr><td>Housing<\/td><td>Rent deduction limit based on city tier<\/td><td>Tax-free reimbursement of actual rent with fapiao<\/td><\/tr><tr><td>Children<\/td><td>Standard education deduction<\/td><td>Tax-free reimbursement of tuition fees<\/td><\/tr><tr><td>Language Training<\/td><td>Not deductible<\/td><td>Tax-free if job-related<\/td><\/tr><tr><td>Flights<\/td><td>Not deductible<\/td><td>Tax-free home-leave flights<\/td><\/tr><tr><td>Meals \/ Laundry<\/td><td>Not deductible<\/td><td>Tax-free with company policy<\/td><\/tr><tr><td>Relocation<\/td><td>Limited deduction<\/td><td>Fully tax-free with invoices<\/td><\/tr><\/tbody><\/table>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-d979bac elementor-widget elementor-widget-text-editor\" data-id=\"d979bac\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<h2>What Other Tax Benefits Apply to Expats in China?<\/h2><p>As a general rule, you will be considered a resident <a href=\"https:\/\/msadvisory.com\/china-individual-income-tax-settlement\/\" data-wpil-monitor-id=\"631\">individual in China<\/a>, if you meet either of the following conditions:<\/p><ul><li>You have a domicile in China; or<\/li><li>The duration of your residence in China exceeds 183 days in a tax year.<\/li><\/ul><p>If you are considered a resident, you will be required to pay taxes on your global income. If you are not considered a tax resident, you will only be required to pay taxes on your China-sourced income.<\/p><p>There is a general exemption for expats in China known as the <a href=\"https:\/\/msadvisory.com\/china-tax-break-principle-for-expatriates\/\">6-year rule<\/a>, meaning that expats who have been in the country for less than 6 years are <strong>not liable to pay income tax on their non-China income<\/strong>.\u00a0<\/p><p>The scope of taxation covers salaries, wages, any labor remuneration as well as any other income sources. The starting point for individual income tax to be applied is RMB 5,000.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-bd9b57f elementor-position-left elementor-vertical-align-middle elementor-position-top speak-expert-new elementor-widget elementor-widget-image-box\" data-id=\"bd9b57f\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"image-box.default\">\n\t\t\t\t\t<div class=\"elementor-image-box-wrapper\"><figure class=\"elementor-image-box-img\"><a href=\"https:\/\/msadvisory.com\/contact\/\" tabindex=\"-1\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china.jpeg\" class=\"attachment-full size-full wp-image-21671\" alt=\"Shanghai China\" srcset=\"https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china.jpeg 1024w, https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china-300x169.jpeg 300w, https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china-768x432.jpeg 768w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure><div class=\"elementor-image-box-content\"><div class=\"elementor-image-box-title\"><a href=\"https:\/\/msadvisory.com\/contact\/\">Optimise Your China IIT Position<\/a><\/div><p class=\"elementor-image-box-description\">Our tax experts help you structure salary, allowances, and deductions efficiently under the new rules.\n<span>Message &nbsp;\u2192<\/span><\/p><\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-7951f3de elementor-widget elementor-widget-text-editor\" data-id=\"7951f3de\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p>China&#8217;s preferential individual income tax policies for foreign expatriates\u2014including housing and meal allowance exemptions, and specific relief programs in high-talent-demand cities like Beijing and Shanghai\u2014can reduce effective tax rates by 20-30% compared to standard taxation. Claiming these benefits requires proper documentation, housing lease evidence, and employer filing. MSA Asia secures your expatriate tax relief. <a href=\"https:\/\/msadvisory.com\/contact\/\">Speak with our advisors<\/a> for <a href=\"https:\/\/msadvisory.com\/service\/financial-advisory\/tax-advisory\/\">China tax advisory<\/a>.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>There has been a great deal of public interest on the preferential tax policy for foreigners in China and whether it will be extended beyond December of 2021. In the past China has allowed expatriate employees to lower their tax burden by claiming a portion of their salary as tax-exempt allowances. After deliberation from the State Administration of Tax, the policy on non-taxable benefits has been approved for a further 2 years, Ending 31 December 2023.  <\/p>\n","protected":false},"author":19,"featured_media":13704,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"iawp_total_views":201,"footnotes":""},"categories":[16],"tags":[],"class_list":["post-9546","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tax"],"acf":[],"_links":{"self":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts\/9546","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/users\/19"}],"replies":[{"embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/comments?post=9546"}],"version-history":[{"count":10,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts\/9546\/revisions"}],"predecessor-version":[{"id":47434,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts\/9546\/revisions\/47434"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/media\/13704"}],"wp:attachment":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/media?parent=9546"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/categories?post=9546"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/tags?post=9546"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}