China’s New IIT Rules: A Guide for Employers - Preview

2 C hina B riefing • Issue 184 • February 2019 Introduction Last year, China introduced the biggest changes to its individual income tax (IIT) system since at least 2011 with the passing of a new IIT law. The new law brought forward a host of changes to individual taxation in China, including by revising tax brackets, expanding deductibles, and altering residency rules for foreign workers. In the process of introducing the new law, however, tax authorities caught many individuals and businesses off guard with the speed at which the changes were announced and implemented. The new tax brackets took effect on October 1, 2018 – only a month after the law was finalized – while the rest of the provisions came into force on January 1, 2019. Not only did the brief transitional window give taxpayers little time to adjust, many of the details of the law were not made clear until additional circulars and announcements were releasedmuch later. The quick and unclear rollout has left individuals and businesses scrambling to make sense of the changes. To help foreign investors and taxpayers understand the ins and outs of the updates, this issue of China Briefing offers a comprehensive guide to China’s IIT reforms. We begin by explaining the most important features of the new IIT law, including the new tax brackets, income categories, special deductions, and residency rules. Next, we analyze the impact of the reforms on foreign expatriates, and then offer a guide outlining how to calculate and withhold IIT. Finally, we look at how the new law affects taxation of annual bonuses. We hope this magazine serves you well in making the most of the personal taxation benefits China offers and helps your business seamlessly transition to the new IIT regime. Asia Briefing Ltd. Unit 507, 5/F, Chinachem Golden Plaza, 77 Mody Road, Tsim Sha Tsui East Kowloon, Hong Kong. www.asiabriefing.com www.dezshira.com www.aseanbriefing.com www.india-briefing.com www.indonesiabriefing.com www.vietnam-briefing.com www.china-briefing.com ADAM LIVERMORE Partner Dezan Shira & Associates Dalian Office With kind regards, Adam Livermore Credits Publisher / Adam Livermore Managing Editor / Adam Pitman Editor / Qian Zhou Contributors / Helen Kong Design / Ha Ngoc Anh Thu Reference China Briefing and related titles are produced by Asia Briefing Ltd., a wholly owned subsidiary of Dezan Shira Group. Content is provided by Dezan Shira & Associates. No liability may be accepted for any of the contents of this publication. Readers are strongly advised to seek professional advice when actively looking to implement suggestions made within this publication. For queries regarding the content of this magazine, please contact: editor@asiabriefing.com All materials and contents © 2019 Asia Briefing Ltd.