In January 2023, China announced changes to its tax policy, substantially increasing personal income tax deductions for Chinese workers. This means up to 3,000 yuan ($410) per month could be retained by your employees if they qualify.
However, to enjoy these benefits, they must first apply! Therefore, it’s imperative for foreign companies operating in China to stay informed and ensure their employees are capitalizing on this advantageous policy.
Below, we unravel the essentials of this policy and guide you through the claiming process.
Policy Overview
The Chinese State Council announced bigger personal income tax deductions for qualified workers back in January, with the increased benefits beginning in September. If any of your employees are in the following situations, they stand to benefit:
- Caring for infants under 3 years old.
- Investing in children’s education.
- Supporting elderly relatives.
Adjustments to tax regulations like these are rare in China, so it’s critical for everyone eligible to maximize these benefits.
The New Rules
- Childcare Deductions for Infants: Raised from 1,000 yuan to 2,000 yuan per child, per month (for children under 3 years old).
- Children’s Education Deductions: Increased from 1,000 yuan to 2,000 yuan per child, per month.
- Support for the Elderly Deductions: Raised from 2,000 yuan to 3,000 yuan per month.
For the last point, it’s crucial to note that “elderly,” under the current provisions, refers explicitly to parents and grandparents who are 60 years old and above; it does not include the parents of the spouse, i.e., fathers-in-law or mothers-in-law.
Claiming the Benefits
Employees who haven’t yet applied can do so via the Individual Income Tax App (个人所得税) or request their employer to initiate the process. Those who’ve applied in preceding years need not reapply; the system will automatically adjust the benefits to align with the new norms. Our team managed to claim these benefits swiftly using the app.
We recommend conducting a thorough check with all your employees to ensure those who are eligible are fully utilizing this benefit. Ensuring that employees are aware and able to use these tax benefits can significantly enhance their financial well-being, positively impacting team morale and productivity. So, act now to secure maximum benefits for your team!
Need Help in China?
To learn more about how we can support your company in navigating the Chinese business environment efficiently and compliantly, schedule a session with our knowledgeable team members today!
