Greater Bay Area China: Individual Income Subsidy For Foreign Talent in the GBA
In order to attract high-skilled and urgently needed talents, the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) introduced a preferential individual income tax (IIT) policy for foreign talents and qualified talents from Hong Kong, Taiwan and Macao in 2019. For a period of 5 years, from 2019 until 2023, qualified applicants are able to obtain subsidies to reduce their IIT burden. The first application round started during summer 2020, where applicants were able to apply for a preferential tax treatment for their 2019 taxable income. As the subsidies were announced to be given for a period of five years until December 31st, 2023, the last application period is intended for summer 2024.
In this article, we provide an overview of the rules for the GBA IIT subsidy, how to apply for the subsidy, and whether you or your employees qualify for it. As the rules and regulations differ between the nine cities, the basis for this article is the regulations of the two largest cities, Guangzhou and Shenzhen. When applying for the GBA IIT refund, we suggest having an internal review or consulting a third-party company together with your employer.
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How does the policy work?
The policy aims to offset differences in the income tax treatment between China and Hong Kong. The 9 cities offering the subsidies to foreign talents include Guangzhou, Shenzhen, Dongguan, Zhuhai, Huizhou, Zhaoqing, Jiangmen, Foshan and Zhongshan. Each city government set up its own application processes as well as requirements for qualifying as high-skilled and urgently needed talent.
It is important to note that the policy does not decrease the IIT that is paid at the source on a monthly basis. During the fiscal year, the individual will be required to pay IIT according to the relevant IIT laws and regulations. At the end of the fiscal year, and after the annual IIT settlement is completed, individuals will then be able to apply for a subsidy in the form of an IIT rebate. The rebate is calculated as the difference between the actual IIT paid by the individual and 15% of the individual’s taxable income. As such, this effectively means the individual receives a rebate over the amount of tax paid, in excess of 15%.
Calculation of the subsidy
If foreign talents qualify in 1 of the 2 categories, they have the opportunity to apply to receive the subsidy, which in general limits the individual tax rate to 15%. If an applicant receives approval of his/her application, the individual will receive the tax-exempt subsidy that is calculated as follows:
Subsidy amount = amount of tax paid (in one of the nine cities) – taxable income * 15%
If an individual receives other types of income in addition to their comprehensive income (such as wages, salary, labor compensation, remuneration and royalties), the subsidy is calculated separately for each type of income and is later transferred as a lump sum. Other types of income can be operating income or subsidized income from talent sponsorships. To calculate the subsidy amount for each income type, the formula is as follows:
Subsidy amount = ∑ amount of tax paid per income type (in one of the nine cities) – taxable income per income type * 15%
Who Qualifies as Foreign Talent
General requirements for Foreign Talents
Foreign nationals, permanent residents in Hong Kong, Taiwan or Macao, as well as Chinese citizens who have returned from overseas (who have the right of long-term residence abroad) can apply to receive the subsidy (exemptions are possible).
In terms of employment, the applicant must work for or be employed by an enterprise or institution registered in 1 of the 9 cities during the tax year. Alternatively, individuals can also apply for the subsidy if they provide independent personal services in the specific city.
Applicants are further required to have a clear record for at least 3 years prior to the application, in terms of tax violations, false reporting, etc. Additionally, the applicant needs to have paid IIT according to the law and needs to hold a Chinese bank account.
Additional requirements per city can also be applicable, such as minimum working days in the municipality or other income requirements. For example, applicants from Guangzhou must work in the city for at least 90 days during the applicable fiscal year. If an applicant stays in the municipality fewer than 24 hours, it is counted as half a day when calculating the number of working days there.
Requirements for high-skilled or urgently needed talents
Qualifying as a high-skilled talent or urgently needed talent, the following general requirements can be listed:
- Being part of a governmental major talent project,
- Being part of a government-recognized research team,
- In possession of a Class A foreigner’s Work permit
- In possession of a confirmation letter of being a foreign high-end talent either by China, Guangdong province, Hong Kong or Macao
- In possession of a government-recognized local special talent card,
- Fulfilling the requirements for talents in short supply by the local human resources bureau, etc.
Additionally, different requirements apply for foreign talents according to the individual cities’ definitions and catalogues. Taking Guangzhou as an example, there are two catalogues providing insights into industries and positions an employee shall work in to qualify as a high-skilled talent or urgently needed talent.
Application Period for the GBA IIT Subsidy
After the fiscal year ended and IIT filings are completed, the application period for the GBA IIT subsidy usually opens from July 1st and lasts until August 31st of the following year (exact time period differs per city). In some cases, the deadline may be extended, as was the case in 2021 where the deadline was extended until September. If a taxpayer has missed the application deadline, he/she still has the opportunity to resubmit the application for the missed year in the following application period.
For example, if the application for the 2020 subsidy was missed during the 2021 application period, it can be resubmitted in the 2022 application period. If the applicant misses the deadline again, it is no longer possible to obtain subsidies for the 2020 fiscal period. As the last application period is planned for the summer of 2024, applicants only have the chance to apply for the 2023 GBA IIT subsidy once.
Application Process for GBA IIT Subsidy
As a 1st step, foreign talents submit the application at the official service platform of the municipality. Subsequently, the employer must review and confirm the application of its employee, which is to be done within the official application period. Upon confirmation of the application by the employer, the application is submitted to the authorities. Generally, the application will be processed within five business days after complete submission. If the application is rejected, the applicant may reapply, which again must be reviewed by the employer within 30 days.
The final government review has a general deadline of 120 days. There is no deadline for the payment of the subsidy, however, in the past the subsidies were usually paid in the month of December of the year the application was submitted.
After the subsidy has been paid, the applicant may file a complaint within 30 days if he/she believes that the amount paid is incorrect. This complaint must be processed and, if necessary, corrected by the authority within 60 days.
Prepare Your GBA IIT Subsidy Application
Before applying for the GBA IIT subsidy, applicants should check whether they meet the requirements of the respective city and prepare all required materials. Additionally, IIT should already be filed correctly and be paid for the respective fiscal year. Foreign talents in the Greater Bay Area shall keep in mind that their employer must review the application within the application period from a timing perspective.
An open communication with the employer, having an internal review and consulting a third-party advisor before filing the application prevents unexpected inquiries from emerging in the further process.
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