

Human Resources and Payroll in China 2016-2017 (5th Edition) -
47
Allowances
The Chinese Tax Bureau allows foreign staff (including those from Hong Kong, Macau and Taiwan)
to deduct certain “allowances” before calculating the tax burden on their monthly salary, provided:
• In the employment contract (and sometimes also in a board resolution depending on the location
of the company), there should be a clear reference to the amount being paid to the employee
under the title of each specific allowance.
• Each month, the employee should produce evidence to show the company that this money
was indeed spent on the services described in the contract; this is done using the ubiquitous
“fapiao,” or official invoice, which should be received whenever an official monetary transaction
is completed in China.
Generally, the following allowances are deductible:
• Meal allowance
Foreign employees are allowed to deduct a certain amount that they spend onmeals eachmonth
from their taxable income. Most of the fapiaos submitted should be issued by restaurants, but for
some portion of the allowance fapiaos issued by supermarkets may also be accepted. Please note
that the fapiao should state that the products purchased were “meals” or “food.”
• Housing allowance
The amount spent on rental of an apartment may also be deducted. However, please be aware
that in China, a private landlord will often be reluctant to issue an official fapiao because in order
to obtain one, he/shemust pay some percentage of the rental amount received to theTax Bureau.
If a fapiao is requested, the landlord will likely charge a large premium on top of the originally
negotiated rental amount. Foreign employees that require a fapiao should negotiate this with
the landlord before signing the rental contract. Fapiao issuance should be clearly mentioned in
the agreement. Foreign employees living in a serviced residence will not have this problem – the
residence will be managed by a company that can issue a fapiao.
• Laundry allowance
This is fairly self-explanatory – an allowance for the dry cleaning of clothes.
• Children’s education allowance
Some of the cost of a foreign employee’s education expense for studying Chinese, or relating to
the education of their children, can be deducted. Note that the education must be received in
China and, as with the other allowances above, a fapiao must be received.