China Tax Update: Challenges Ahead, Advice on Hand
Expatriates in China currently enjoy several tax benefits including housing allowance and tax-deductible school fees. By the end of 2021, the majority of these benefits are set to end.
From 2022, expatriates working in China will be eligible for the same special additional deductions as Chinese citizens i.e. :
Less tax deductible income for foreign employees in China will mean a significant cut to net salary, or an increase in payroll costs for employers. We suggest that negotiations with expatriates start early to minimise the impact of these changes. We can guide you in several key areas:
- Restructuring remuneration for tax optimisation
- Reviewing and amending employment contracts and employees handbooks
- Utilising our trusted Executive Search services to hire local talent
Besides China’s impending tax reform for expatriates, there are several more compliance areas that can act as hidden cost drivers. For instance, your transfer pricing policies require constant adjustment due to China’s frequently changing laws and regulations. Additionally, performing a Corporate Health Check can help you improve your company’s cost structure.
Reviewing transfer pricing policies remains a top priority for companies to ensure compliance with each territorial regulation. Our advisors will help you:
- Manage risk by assessing intra-group procedures
- Make sure the necessary TP documentation is completed and filed on time
- Conduct year-end adjustments
Fiducia’s Corporate Health Check
Our advisors will pinpoint “questionable costs” and advise on how to structure them in a compliant and efficient way, for example:
- Identify questionable expenses, such as incorrect VAT handling or travel expenses
- Collect necessary evidence to guard against tax queries and penalties
- Audit inventory and stock to make sure these are accurately reflected in your financial statements
Tax laws in China are complex. Penalties for non-compliance can be severe. Whether your company needs help to navigate the impact of changes to individual income tax, a comprehensive health-check or an end-to-end transfer pricing analysis, we are up-to-date with all reforms and ready to support you. Please get in touch to schedule an appointment with our team.