China to Extend Tax Break Policies for Foreign Nationals

The finance ministry announced on Aug 29 that China will extend preferential tax policies for foreign nationals working in the country until the end of 2027, a boon to foreign firms struggling to attract talent post-COVID.

The government proposed eliminating non-taxable allowances for foreign workers in 2022, but decided to extend the scheme until the end of this year on a case-by-case basis.

Foreign chambers of commerce and business organisations in China had been seeking urgent clarification on whether the government would extend the policy that allows expatriates to deduct taxable expenses for housing, children's education, language training, and other expenses.

"We believe that this will help to curtail further outflows of qualified international talent, while also providing multinational companies with clarity on their talent strategy regarding the deployment of expatriate staff and the structuring of their packages," said Kiran Patel, senior director at the China-Britain Business Council.

"The Chinese government's announcement to extend the existing individual income tax regime is a genuine statement of commitment to multinational corporations operating in China."

As China's economy slows, authorities have struggled to resurrect foreign investment, with global firms unimpressed by new incentives that they say fall far short of the sweeteners once used to entice foreign capital.