On Saturday, March 16, a favorable policy was announced that offers tax relief for overseas talents working in the Greater Bay Area.
The tax incentives are a part of China’s efforts to encourage the development of one of its most important economic regions consisting of Hong Kong, Macau, and 9 cities in Guangdong province, including Shenzhen, Guangzhou and Zhuhai. The Greater Bay Area covers over 56,000 square kilometers of land with 68 million people living there and is projected to have a combined GDP of US$3.6 Trillion by 2030, which will make it the 5th largest economic zone in the world.
The policy, effective from January 2019 to the end of 2023, offers subsidies to overseas talents and professionals in short supply that work in the Greater Bay Area to offset the Individual Income Tax (IIT) differential between Chinese mainland and Hong Kong. The subsidies will be exempt from individual income taxation.
In addition, an individual will be exempted from IIT for income sourced from abroad or paid by companies or individuals abroad if he or she meets the new “6-Year Rule”, extended from the previous 5 years. In other words, as long as an individual is considered a resident for tax purposes in China for no more than 6 consecutive years, the exemption applies. To meet the criteria for the exemption, the individual can either reside in China for less than 183 days cumulatively in any tax year during a 6-year period, or leave China for more than 30 days consecutively in any tax year during a 6-year period. Once the “6-Year” chain is broken, the count will reset.
To illustrate, assume Mr. Adams, a UK citizen, works in Shenzhen between Jan 1, 2019 and Dec 31, 2024. During the winter holidays of 2023, Mr. Adams plans to take a 4-week vacation to travel in south-east Asia. In no other year will Mr. Adams exit Shenzhen for more than 30 days. In this example, Mr. Adams will have successfully broken the 6-year chain in 2023 with his 4-week vacation outside of China. Since the “break” falls within the 6-year-period between Jan 1, 2019 and Dec 31, 2024, Mr. Adams will not be taxed on his non-Chinese sourced income. The count will reset to zero upon Mr. Adams’ return to Shenzhen after his vacation in 2023.
With the introduction of the new tax breaks, companies in the Greater Bay Area will see considerable growth in the number of overseas workers who are incentivized to work in the region. To ensure that clients adapt smoothly to the new tax rules and understand the related implications, CanCan看看 group is happy to provide advice and assistance to clients from its Greater Bay Area offices in Shenzhen and Hong Kong.
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