Cancellation of Non-taxable Allowances to Foreign Employees Go back »

2021-02-23 | All chapters

Cancellation of Non-taxable Allowances to Foreign Employees

As part of China’s individual income tax reform announced in 2018 (Caishui [2018] No. 164), the transition period for the phase-out of relevant non-taxable allowances like housing allowance, children’s tuition allowance, relocation allowance, language allowance etc. granted to foreign employees will end on 1st January 2022. From that day, such benefits will become fully taxable.

The cancellation of non-taxable allowances for companies that employ foreign employees is expected to significantly raise human resource costs for companies, deter expatriate assignments and negatively impact foreign investment.

The European Chamber’s Finance and Taxation working group, Human Resources working groups and Advisory Council have been advocating on this matter since 2018. Recently, the working groups summarised the assessment of and recommendations on this issue, as well as the Chamber’s advocacy actions to address our concerns with the Chinese government and survey results on its potential impact.

If your company is a member of the European Chamber and you would like to receive the abovementioned summary, please contact Lexie Li (Beijing, lli@europeanchamber.com.cn), Benedetta Borri (Shanghai, bborri@europeanchamber.com.cn) or Peter Drucker (South China, pdrucker@europeanchamber.com.cn).

To be kept abreast of future developments and/or contribute to these efforts, we welcome you to join the Finance & Taxation Working Group and Human Resources Working Group.