Preferential Policies of Individual Income Tax

(1) Foreign experts are exempted from the individual income tax for their wages. The following foreign experts are exempted from individual income tax for their wage and salary (CSZ (1994) No. 20):

a. Foreign experts directly designated by World Bank to China according to the Special Loan Agreement of the World Bank;

b. Foreign experts directly designated by UN organizations to China;

c. Foreign experts designated to China for the UN aid programs;

d. Foreign experts designated by donor countries to China for the donated programs without payments;

e. Foreign cultural and educational experts in China for cultural exchange programs for no more than 2 years based on the agreement of two governments, whose wage and salary are borne by the designated country;

f. Foreign experts designated by non-official scientific research institutes, with the wage and salary borne by the organization of the designated country.

(2) Foreign employees who work only in international organs and embassies in China may be exempted from the individual income tax temporarily.

(3) The foreigners can be exempted from individual income tax with relevant verifications approved by tax authorities for their housing allowance, accommodation allowance, washing fee, removal costs, business trip allowance, home leave expense, language training fee, children educational expense and other allowances in the form of non-cash or complete reimbursement.

(4) The foreign investors shall be exempted from income tax for the profits (stock bonus, interests) gained from foreign invested enterprises or stock bonus and dividends gained from Sino-foreign joint ventures.

(5) Foreign enterprises and individuals holding B Share shall be temporarily exempted from the enterprise income tax and individual income tax respectively for the stock bonus (dividends) they gained from B Share or overseas share issuing enterprises within Chinese territory.

(6) Upon the verification of local taxation authorities, foreign insurance premiums of employees working in China, which are paid by foreign invested enterprises or exclusively foreign funded enterprises but not deducted from taxable income of the enterprise and which, according to relevant state laws and regulations, are fees of social insurance and shall be paid by the employer, may not be included in the individual income tax of the employee.

(7) Teachers and researchers concerned, who are citizens of the contracting state and engaged in teaching, lecturing or scientific researches in Chinese universities, colleges, schools or other educational institutes, or scientific research institutions, based on the tax exemption clause in the agreement signed by Chinese and foreign departments, are exempted from the income tax during the period stipulated by the agreement.