Policy Content

To further alleviate the tax burden on taxpayers, the policy regarding personal income tax on subsidies for foreign individuals is announced as follows:

Foreign individuals who meet the conditions of resident individuals may choose to enjoy the special additional deduction for personal income tax, or they may choose to enjoy the tax exemption benefits for subsidies such as housing allowances, language training fees, and child education fees in accordance with the provisions of the "Notice of the Ministry of Finance and the State Administration of Taxation on Several Issues Concerning Individual Income Tax Policies" (Caishui [1994] No. 020), the "Notice of the State Administration of Taxation on the Implementation of Individual Income Tax Exemption for Foreign Individuals Obtaining Relevant Subsidies" (Guoshuifa [1997] No. 54), and the "Notice of the Ministry of Finance and the State Administration of Taxation on the Exemption of Individual Income Tax for Foreign Individuals Obtaining Subsidies for Housing in Hong Kong and Macao Areas" (Caishui [2004] No. 29). However, they cannot enjoy both simultaneously. Once foreign individuals make a choice, it cannot be changed within one tax year.

This announcement is effective until December 31, 2027.

Policy Subjects

Foreign individuals who meet the conditions of resident individuals.

Application Conditions

Foreign individuals who meet the conditions of resident individuals may choose to enjoy the special additional deduction for personal income tax, or they may choose to enjoy the tax exemption benefits for subsidies such as housing allowances, language training fees, and child education fees. However, they cannot enjoy both simultaneously. Once foreign individuals make a choice, it cannot be changed within one tax year.

Policy Basis

The "Individual Income Tax Law of the People's Republic of China" and its implementing regulations, as well as the "Notice of the Ministry of Finance and the State Administration of Taxation on Several Issues Concerning Individual Income Tax Policies" (Caishui [1994] No. 20), specify the scope of personal income tax exemption for foreign individuals obtaining relevant subsidies. The specific definitions and management issues regarding the implementation of the above regulations are clarified as follows:

1. Reasonable housing allowances, meal subsidies, and laundry fees obtained by foreign individuals in non-cash or reimbursement form are exempt from personal income tax. Taxpayers should provide valid certificates of the above subsidies to the competent tax authorities in the month following the month in which they first obtain the subsidies or when the amount or payment method of the subsidies changes. The competent tax authorities will approve and confirm the tax exemption.
2. Income from relocation obtained by foreign individuals in the form of reimbursement is exempt from personal income tax when they arrive in or depart from China. Taxpayers should provide valid certificates, and the competent tax authorities will review and determine the reasonable portion that is exempt from tax. Costs paid by foreign-invested enterprises and foreign enterprises in China to their foreign employees in China in the form of relocation expenses should be included in the calculation of personal income tax on salary and wages.
3. Subsidies for domestic and overseas business trips obtained by foreign individuals according to reasonable standards are exempt from personal income tax. Taxpayers should provide vouchers (copies) for transportation and accommodation expenses during business trips or relevant plans arranged by enterprises. The competent tax authorities will confirm the exemption.
4. Fees for visiting family members obtained by foreign individuals are exempt from personal income tax. Taxpayers should provide vouchers (copies) for transportation expenses incurred while visiting family members. The competent tax authorities will review and grant exemptions for the reasonable portion used for personal visits each year.
5. Subsidies for language training fees and child education fees obtained by foreign individuals are exempt from personal income tax. Taxpayers should provide expenditure vouchers and deadline certificates for education received in China. The competent tax authorities will review and grant exemptions for language training fees and child education fees obtained in China, within reasonable amounts.