Expansion of Preferential Income Tax and Corporate Income Tax Policies in Shenzhen’s Qianhai Cooperation Zone

The Shenzhen Municipal Tax Bureau, Shenzhen Municipal Finance Bureau, and State Tax Administration have expanded tax incentives in the Qianhai Cooperation Zone. Hong Kong residents working there will be exempt from paying excess individual income tax and companies will have a reduced corporate tax rate.

The Shenzhen Municipal Tax Bureau, Shenzhen Municipal Finance Bureau, and State Tax Administration have issued two notices broadening tax incentives for individuals and companies in the Qianhai Cooperation Zone.

The Shenzhen Municipal Tax Bureau, Shenzhen Municipal Finance Bureau, and State Tax Administration have released two notices expanding a preferential individual income tax (IIT) and corporate income tax (CIT) policy for companies and individuals working in the Qianhai Shenzhen-Hong Kong Modern Service Industry Economic Cooperation Zone (“Qianhai Cooperation Zone”).

Under the expanded policies, Hong Kong residents working in the Qianhai Cooperation Zone, a development zone located in Shenzhen, will be exempted from paying the portion of IIT exceeding their salary tax burden in Hong Kong. In addition, a 15 percent CIT rate, reduced from the standard 25 percent rate, has been expanded to more areas of the zone.

Hong Kong applies a progressive salary tax rate ranging from 2 to 17 percent. Meanwhile, China’s IIT rate ranges from 3 to 45 percent. This means many Hong Kong residents would enjoy a lower IIT rate if they remained in Hong Kong, potentially disincentivizing the flow of talent to the Qianhai Cooperation Zone. This policy therefore ensures Hong Kong residents will not have to pay more IIT if they choose to work in the Qianhai Cooperation Zone rather than Hong Kong.

High-end and in-demand foreign talent in the Qianhai Cooperation Zone are already able to enjoy a preferential IIT policy that allows them to reclaim the portion of IIT paid in excess of 15 percent in the form of subsidies.

The income covered includes comprehensive income derived from Qianhai (including wages, salaries, labor remuneration, royalties, and franchise fees), operating income, and talent subsidy income certified by the local government.

The Hong Kong residents eligible for this policy can enjoy this preferential policy when settling their annual IIT in Qianhai.

This article is republished from China Briefing. Read the rest of the original article.

China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.