A three-year transition period during which expats in China could benefit from special tax-free benefits was to end on 31 December 2021.
Based on a notice from the Chinese Ministry of Finance and the State Administration of Taxation dated 27 December 2018, expats were to be treated equally with Chinese employees after the end of a transitional period.
The implementation of this measure from 01.01.2022 would have far-reaching consequences for foreign employers whose employees work as expats in China.
But employers and the expat community affected can now breathe a sigh of relief for the time being:
Shortly before the expiry of the previous transitional period, the Chinese government has decided to extend this period by another 2 years.
The tax advantages previously granted to expats resident in China will now continue to apply until 31 December 2023.
These include not only the benefits for housing allowance, language training allowance or children education allowance.
The previous separate taxation of the annual bonus / one-off annual special payment will also not be abolished for the time being, but will be maintained until 31 December 2023.
But: Postponed is not cancelled.
If the legal situation does not change by the end of 2023, the decision-makers and HR personnel involved will have to prepare for the changes that will then apply from 2024 and take them into account when planning existing or future assignments.
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GTAI, Chinese authorities, own research.