Proposed changes to Chinese income tax laws have a significant impact on both foreign and local employees

January 11, 2018

Proposed changes to Chinese income tax laws have a significant impact on both foreign and local employees

A draft amendment on the PRC Individual Income Tax (“IIT”) Law has been released recently for public consultation. The main proposed changes include the followings:-

The proposed changes under this draft amendment, if passed, will have a significant impact on both local and foreign employees’ tax implications in China.

What action is required?

The new tax rules raise both compliance and tax planning risks.

Employers should ensure that they understand the potential changes on both tax calculations and tax administration and withholding requirements. The proposed changes will affect employers’ daily operations on the IIT withholding matters in future.

For the expatriate employees, consideration should be given to performing a review of their PRC income tax status. In particular, their tax resident status; whether their existing tax planning arrangements will remain valid; and, what any additional tax impacts may be under the new proposed IIT Law.

For both foreign nationals and local employees employed in PRC both employers and employees should be aware of the new proposed “itemized tax-deductible items”. In future, their overall tax liabilities may be significantly reduced by making use of these “itemized tax-deductible items”.

Further information

For further information or to discuss any of the issues raised, please contact Mr. Janssen Chan ( on +852 3428 2788 or Mr. Brian Cheng ( on +852 3428 2385).


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