New 2022 Foreigner Income Tax Policy in China Postponed!

Before, things are about to change for foreign employees working in China this year. 

The Individual Income Tax Law categories taxpayers into resident and non-resident individuals. 

Foreign employees have resided in China for less than 183 days are non-resident individuals and can not enjoy special additional deductions.

Foreign employees have resided in China for 183 days or more, they will be categorized as resident individuals and will be taxed the same way as Chinese residents.

Starting from January 1, 2022, individual foreign residents will no longer enjoy tax-free fringe benefits.

Under the current eight foreign individual tax-free fringe benefits, housing benefit, language training expense, and child education expense will fall under the additional itemized deductions. 

The remaining five benefits will continue to be eligible for tax exemption, which include home leave expense, meal expense, relocation expense, laundry expense and Inbound and outbound travel allowance.

But, The Ministry of Finance of the People's Republic of China issued an announcement that the transition period of individual income tax policy will be extended further till December 31, 2023 in order to further reduce the burden on taxpayers.

During these 2 years, foreign individuals can continue to enjoy the tax-free fringe benefits, but have to choose between the additional itemized deductions for individual income tax, or the tax-free fringe benefits for housing, language training expense, child education expense and other benefits. They cannot enjoy both benefits at the same time and not allowed to switch within the same tax year once elected.

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