Foreign individuals working in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) will be able to enjoy the preferential Individual Income Tax Policies (IIT) until December 31, 2027, according to an extension announced last August by the Chinese Ministry of Finance (MOF). The subsidy was set to expire at the end of 2023.
After the announcement, Guangzhou released a draft document outlining the updated requirements for foreign talent to enjoy the subsidy in the city. The IIT subsidy is applicable in all nine mainland cities in the Guangdong-Hong Kong-Macao Greater Bay Area, which are Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing.
Under this preferential policy, eligible foreign talent can have the portion of IIT paid on their taxable income that is more than 15% subsidized by the local government.
The GBA IIT subsidy was first implemented by China’s MOF and State Tax Administration (STA) in 2019 to attract high-end or in-demand talent from other countries. However, the municipal governments did not open applications for the subsidy in 2022 due to tight fiscal policies and huge budget allocations to prevent and control the COVID-19 pandemic.
The Guangdong Provincial Department of Finance issued a notice to the municipal governments of the nine mainland GBA cities, authorizing once more the procedures for the subsidy.
Following this notice, the Guangzhou municipal government released a draft amendment of its 2021 measures for the implementation of the GBA IIT policy, which outlines the specific eligibility requirements and other details for the implementation of the subsidy. This action was similarly followed by Foshan.
Shenzhen extended the application deadline for the IIT subsidy for the tax years 2021 and 2022 until October 20, 2023. The city issued updated application guidelines for the subsidy. At the moment, Shenzhen is the only city that has begun accepting applications, while Foshan and Guangzhou released draft guidelines for comment.
The remaining cities of the GBA are yet to do the same. Local authorities have not announced when they will begin to accept applications again.
The IIT subsidy is capped at RMB 5 million (approx. US$691,266) for each taxpayer in a given tax year (China’s tax year runs from January 1 to December 31).
The tax eligible for the subsidy is paid on the following types of income:
Income from wages and salaries;
Income from remuneration for labor services;
Income from author remuneration;
Income from royalties;
Business income; and
Subsidized income obtained through talent projects.
Each of the nine mainland cities in the GBA must create a local talent catalog, which identifies the eligible high-end and in-demand foreign talent.
Eligibility for the GBA income tax subsidy
Each city’s local talent catalog determines the eligibility of foreign talent. All applicants, regardless of which city they apply from, must meet the following requirements:
Be a permanent resident of Hong Kong and Macau, a Hong Kong resident who has obtained residency through a Hong Kong entry program (for talent, professionals, and entrepreneurs), a resident of the Taiwan region, a foreign national, a mainland Chinese returnee, or overseas Chinese who has obtained long-term residence abroad;
Work in one of the nine mainland cities and pay taxes there according to law;
Abide by laws and regulations, scientific research ethics, and scientific research integrity;
Be a talent in the fields of scientific and technological innovation, key development industries and philosophy and social sciences, and meet the requirements of the catalogs of overseas high-end talents and talents in short supply in each city.
Guangzhou Requirements for the IIT subsidy
Municipal governments can tailor the subsidy to the industries within their jurisdiction, to better target the specific types of talent that are needed. Guangzhou requires the applicant to meet additional requirements for the subsidy, depending on whether they are classified as “overseas high-end talent” or “overseas in-demand talent”.
Both in-demand and high-end talent must meet the following conditions:
Work or be employed by an enterprise or other institution registered in Guangzhou during the tax year, provide independent personal labor services in Guangzhou, or engage in production and business activities in Guangzhou;
Work in Guangzhou for more than 90 days in a given tax year;
Pay IIT in Guangzhou;
Not been included in the list of untrustworthy joint punishment targets in accordance with laws and regulations at the time of application; and
Meet the standards set out in the respective in-demand and high-end talent catalogs (see below).
The taxable income of overseas in-demand talent must also exceed RMB 300,000 (approx. US$41,370) in a given tax year.
The Nansha New Area subzone of the Guangdong Pilot Free Trade Zone, located in Guangzhou’s Nansha District, offers another preferential IIT policy for Hong Kong and Macao residents. Candidates that are eligible for both this policy and the GBA IIT subsidy can only enjoy one of these in a given tax year and can choose which policy to apply for.
Guangzhou’s catalogs of overseas in-demand and high-end talent
To be classified as an overseas high-end talent, an applicant must hold a Class A Foreigner’s Work Permit, a Confirmation Letter for Foreign High-end Talents, Confirmation Letter for High-level Talent from Overseas, Hong Kong, or Macao in the nine mainland GBA cities, and be recognized by the competent authorities for talent work at the national, provincial, and municipal levels.
High-end talent must also be engaged in certain fields or industries and serve in mid-to-senior-level managerial positions or be key personnel in production technology.
An applicant must be core technical personnel or skilled personnel to be classified as overseas in-demand talent, and hold a mid-to-senior-level managerial position in one of the eligible industries.
The industries and institutions that overseas high-end and in-demand talent must work for in Guangzhou to be eligible for the GBA IIT subsidy are:
Manufacturing enterprises and technology-based enterprises in Guangdong’s ten strategic pillar industries and ten strategic emerging industries;
Manufacturing enterprises in Guangzhou’s pillar industries, strategic emerging industries, and technology-based enterprises and their productive services;
Modern service industries. such as accounting, law, finance, consulting, R&D and design, and other key development industries.
The ten strategic pillar industries in Guangdong are new-generation electronic information, green petrochemicals, smart home appliances, automobiles, advanced materials, modern light industry textiles, software and information services, ultra-high-definition video displays, biomedicine and healthcare, modern agriculture, and food.
The ten strategic emerging industries in Guangdong are semiconductors and integrated circuits, high-end equipment manufacturing, intelligent robots, blockchain and quantum information, cutting-edge new materials, new energy, laser and additive manufacturing, digital creative industries, emergency response and environmental protection, precision instruments and equipment.
Guangzhou’s pillar industries are automobiles, petrochemicals, and electronics.
Guangzhou’s strategic emerging industries are new generation information technology, intelligent and new energy vehicles, biomedicine and health, Intelligent equipment and robots, rail transit, new energy and energy conservation and environmental protection, new materials and fine chemicals, digital creative industries, and various future industries such as quantum technology, blockchain, terahertz, natural gas hydrate, and nanotechnology.
Productive service industries are R&D, design and other technical services for production activities, cargo transportation, general aviation production, warehousing and postal express services, information services, financial services, energy conservation and environmental protection services, productive leasing services, business services, human resource management and vocational education and training services, wholesale and trade brokerage agency services, and productive support services.
Science and technology service industries are scientific research and experimental development services, specialized technical services, science and technology promotion, and related services, science and technology information services, science and technology financial services, science and technology popularization, publicity, and education services, and comprehensive science and technology services.
Catalogs are updated regularly to adapt to the talent needs of each city. In recent years, municipalities have offered greater detail on specific companies and positions needed.
Applying for the GBA income tax subsidy in 2023
The GBA IIT subsidies are processed once a year during the implementation period (from 2019 to 2023), and applications for the subsidy for each tax year are accepted the following year.
If the applicant’s IIT is withheld by a withholding agent, the agent is generally responsible for applying for the subsidy. If the applicant declares and pays IIT by themselves, then they must file the application.
The dates of the application window are set each year by the Municipal Science and Technology Bureau and the Municipal Human Resources and Social Security Bureau. The Guangzhou government has not yet announced when they will begin to accept applications in 2023.
Retroactive applications for the 2020 tax year, as well as applications for tax years 2021 and 2022, will be processed together during the application window in 2023.
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