China’s tax policy encourages new benefits

The Chinese government has introduced new and very important tax policy measures. These include tax advantages for investment in office equipment, a new tax calculation method for annual bonus payments, and tax exemptions for foreigners. The new regulations are due to apply from 2024.

Notice No. 37/2023, issued by the Ministry of Finance and State Taxation Administration, focuses on encouraging companies to invest in equipment and devices to boost the domestic economy. Between 1 January 2024 and 31 December 2027, enterprises will be allowed to include the cost of equipment and devices valued at CNY 5 million or less in their current expenses on a lump-sum basis and deduct the full amount of such costs from their taxable income. The goal is to encourage companies to modernise their operations and become more competitive, while benefiting from tax incentives. The existing tax rules will continue to apply for equipment and devices valued at more than CNY 5 million, explain the Ecovis experts.

ECOVIS Ruide Shanghai and ECOVIS Heidelberg are available to answer all your tax questions in China.

Richard Hoffmann, Lawyer, ECOVIS Rechtsanwaltskanzlei Richard Hoffmann, Heidelberg, Germany

Additional tax breaks for foreigners in sight

A separate announcement from the Ministry of Finance and the State Taxation Administration confirms the expansion of tax incentives for foreigners in China. Aiming to enhance the country’s appeal to foreign investors, the changes will see an extension of the special tax calculation method for annual bonuses and exemptions for foreigners in areas such as rental income, childcare and language instruction.

Taxpayers can choose to use the traditional method for calculating bonus taxes or follow the new legislation, which incorporates the calculation of total annual income.

For further information please contact:

Richard Hoffmann, Lawyer, ECOVIS Rechtsanwaltskanzlei Richard Hoffmann, Heidelberg, Germany
Email: richard.hoffmann@ecovis.com