Who needs to take a Personal Tax Assessment and Why?

Causes and Backgrounds

The new Individual Income Tax Law came into effect on 1 January 2019, which has taken 7 years since the last revision, and many related regulations have also been modified.  These new regulations will have a significant impact on foreign individuals working in China.

The new regulations will have an impact on the previous “five-year rule”, allowances, year-end bonuses, and treatment of stock options, and a new way of deduction policies.

In order to the taxation policy on individual income, the state has strengthened the collection and management of income derived from outside China, and a series of legal and regulatory provisions are released in the year 2020.

It is currently in a transition period of policy changes, and 2022 will be a new starting point that many of the policy provisions coming into effect on 1 January 2022.  Therefore, it is now a good timing to prepare for the upcoming changes and rethink compensation packages, allowances, net pay, and tax burden. Adequate preparation would allow a smoother transition and will face the new policy with fewer risks.

Besides individuals, these new regulations will also affect company’s and there will be a need for reviewing internal policies and processes to ensure compliance with new rules and also determine how it will affect their foreign employees based on their different backgrounds.

At SONG we provide a Personal Tax Assessment report for companies and individuals which allows us to determine the potential risk for each person individually based on the several aspects that would allow creating a particular strategy on mitigating risks.

Who needs a Personal Tax Assessment report?

• If you would like to have a clear picture of your current tax situation;
• If you are married and your spouse is Chinese;
• If you have a variety of income types that need to be organized;
• If you are a foreign worker and China is the country where you mainly work and live;
• If you have incomes outside China, but you have no idea whether to be taxed in China or not and how much tax to pay;
• If your company has foreign employees

Why is it necessary to take a Personal Tax Assessment?

• To have a clear understanding of the impact of various Chinese policies on individual income tax to your particular situation;
• To get an overview of current and future policy changes on your tax burden;
• To understand what needs to be prepared in advance;
• To start to prepare internal company processes for upcoming regulations beforehand

Our door is opened and you are always welcomed to contact us for more information.