Greater Bay Area Resumes Preferential IIT Subsidy for Foreign Talent in 2023

The flagship individual income tax (IIT) policy for foreign talent working in China’s Guangdong-Hong Kong-Macao Greater Bay Area (GBA) has officially kickstarted again in 2023, after being put on the back burner in 2022. Following an announcement from the Guangdong provincial authorities on the return of the policy, Guangzhou released a draft document outlining the updated requirements for foreign talent to enjoy the subsidy in the city. We outline the requirements of the GBA income tax subsidy and the latest changes to Guangzhou’s eligibility standards.

UPDATE (September 27, 2023): Shenzhen has extended the application deadline for the individual income tax (IIT) subsidy for the tax years 2021 and 2022 until October 20, 2023. At the end of August, the city issued updated application guidelines for the IIT subsidy. The IIT subsidy is applicable in all nine mainland cities in the Guangdong-Hong Kong-Macao Greater Bay Area, but Shenzhen is the only city that has begun accepting applications at the time of writing. In July, Foshan released draft guidelines for comment.

UPDATE (August 28, 2023): On August 25, 2023, the Ministry of Finance (MOF) issued the Circular on Continuing the Preferential Individual Income Tax Policies (IIT) in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), specifying that the relevant policies will remain in force until December 31, 2027.

Guangdong province has released a new document on the implementation of the preferential individual income tax (IIT) subsidy for foreign talent living in the nine mainland cities of the GBA. Under this preferential policy, eligible foreign talent can have the portion of IIT paid on their taxable income that is in excess of 15 percent subsidized by the local government. 

The GBA IIT subsidy was first implemented by China’s Ministry of Finance (MOF) and State Tax Administration (STA) in 2019 in order to attract high-end or in-demand talent from overseas to the GBA. However, the municipal governments did not open applications for the subsidy in 2022 as they adopted tight fiscal policies and allocated huge portions of their budgets to COVID-19 prevention and control. Originally set to expire by the end of 2023, the subsidy is currently available until 2027.

Now, the Guangdong Provincial Department of Finance has issued a notice to the municipal governments of the nine mainland GBA cities, officially kicking off the procedures for the subsidy once more.

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Following this notice, the Guangzhou municipal government released a draft amendment of its 2021 measures for the implementation of the GBA IIT policy, which outlines the specific eligibility requirements and other details for the implementation of the subsidy. The Guangzhou government solicited feedback on the document until July 5, 2023. 

Foshan followed the practice and its draft amendment of its 2011 measures for the implementation of the GBA IIT policy was open for comments until July 26, 2023.

At the time of writing, only Guangzhou and Foshan have released their updated management measures (exposure draft for comments) for the application of the IIT policy in the city. The local authorities have not yet announced when they will begin to accept applications again. 

 We will continue to monitor the release of further guidelines and application guidelines from Guangzhou and the other eight cities  

What is the GBA income tax subsidy? 

The GBA IIT subsidy is a subsidy given to overseas high-end and in-demand talent working in the Guangdong-Hong Kong-Macao Greater Bay Area. Under the program, the portion of IIT that a person has paid in one of the nine mainland cities of the GBA that is in excess of the first 15 percent of their taxable income is subsidized by the respective municipal government. This subsidy is also exempt from further IIT. 

The IIT subsidy is capped at RMB 5 million (approx. US$691,266) for each taxpayer in a given tax year (China’s tax year runs from January 1 to December 31). 

The tax that is eligible for the subsidy is the tax that is paid on the following types of income: 

1. Income from wages and salaries;
2. Income from remuneration for labor services;
3. Income from author remuneration;
4. Income from royalties;
5. Business income; and
6. Subsidized income obtained through talent projects. 

Each of the nine mainland cities in the GBA are tasked with compiling a local talent catalog, which identifies the eligible high-end and in-demand foreign talent according to each city’s requirements. 

Who is eligible for the GBA income tax subsidy? 

The GBA IIT subsidy is available to eligible overseas in-demand and high-end talent, as defined in each city’s local talent catalog. 

All applicants, regardless of which city they apply from, must meet the following requirements: 

1. Be a permanent resident of Hong Kong and Macau, a Hong Kong resident who has obtained residency through a Hong Kong entry program (for talent, professionals, and entrepreneurs), a resident of the Taiwan region, a foreign national, a mainland Chinese returnee, or overseas Chinese who has obtained long-term residence abroad;
2. Work in one of the nine mainland cities (Guangzhou, Shenzhen, Zhuhai, Dongguan, Huizhou, Zhongshan, Jiangmen, Zhaoqing, and Foshan) and pay taxes there according to law;
3. Abide by laws and regulations, scientific research ethics, and scientific research integrity;
4. Be a talent in the fields of scientific and technological innovation, key development industries, and philosophy and social sciences, and meet the requirements of the catalogs of overseas high-end talents and talents in short supply in each city. 

Requirements for the IIT subsidy in Guangzhou

As mentioned in the Guangdong document, each mainland city in the GBA will have its own scope of requirements for candidates and talent catalog. This will enable the municipal governments to tailor the subsidy to the industries within their jurisdiction, to more accurately target the specific types of talent that are in need. 

In addition to the Guangdong-wide requirements, Guangzhou also requires the applicant to meet additional requirements for the subsidy, depending on whether they are classified as “overseas high-end talent” or “overseas in-demand talent”. 

Both in-demand and high-end talent must meet the following requirements: 

• Work or be employed by an enterprise or other institution registered in Guangzhou during the tax year, provide independent personal labor services in Guangzhou, or engage in production and business activities in Guangzhou; 
• Work in Guangzhou for more than 90 days in a given tax year; 
• Pay IIT in Guangzhou; 
• Not been included in the list of untrustworthy joint punishment targets in accordance with laws and regulations at the time of application; and
• Meet the standards set out in the respective in-demand and high-end talent catalogs (see below). 

The taxable income of overseas in-demand talent must also exceed RMB 300,000 (approx. US$41,370) in a given tax year. 

Note that the Nansha New Area subzone of the Guangdong (China) Pilot Free Trade Zone, located in Guangzhou’s Nansha District, also offers another preferential IIT policy for Hong Kong and Macao residents. Candidates that are eligible for both this policy and the GBA IIT subsidy can only enjoy one of these policies in a given tax year, but are free to choose which policy to apply for. 

Guangzhou’s catalogs of overseas in-demand and high-end talent 

To be classified as an overseas high-end talent, an applicant must hold a Class A Foreigner’s Work Permit, a Confirmation Letter for Foreign High-end Talents, Confirmation Letter for High-level Talent from Overseas, Hong Kong, or Macao in the nine mainland GBA cities, and be recognized by the competent authorities for talent work at the national, provincial, and municipal levels.

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High-end talent must also be engaged in certain fields or industries and serve in mid-to-senior-level managerial positions or be key personnel in production technology. 

Meanwhile, to be classified as overseas in-demand talent, an applicant must be core technical personnel or skilled personnel, and hold a mid-to-senior-level managerial position in one of the eligible industries. The applicant must also have professional abilities and qualities that are commensurate with their job responsibilities. 

The industries and institutions that overseas high-end and in-demand talent must work for in Guangzhou to be eligible for the GBA IIT subsidy are outlined in the table below. 

In past years, municipal governments have provided much more detailed catalogs for in-demand and high-end talent, usually including a specific scope of eligible companies and positions. Guangzhou’s 2023 catalogs, however, only list the fields, industries, and types of institutions that the foreign talent must be working in to be eligible. 

However, the previous catalogs may still be useful as a reference for this year’s applications. Guangzhou’s 2021 catalogs for in-demand and high-end talent can be found here and here. 

Calculating the GBA income tax subsidy 

The financial subsidy for IIT on income from wages and salaries, remuneration for labor services, income from author remuneration, and income from royalties for a single tax year in Guangzhou is calculated as follows: 

Financial subsidy = ∑ (Tax burden difference of each item and each tax year × Proportion of tax already paid for each item) 

Proportion of tax already paid for each item = Tax already paid for each item and each tax year in Guangzhou ÷ Tax already paid for each item and each tax year within the territory of China 

Meanwhile, the tax burden difference for each item and each tax year is calculated differently depending on the type of income and residence status of the applicant, as below: 

Individual comprehensive income items for residents (including income from wages, salaries, remuneration for services, income from royalties, and income from royalties):  

Tax burden difference for each tax year = Tax already paid for comprehensive income – Taxable income for comprehensive income × 15 percent 

Income from wages and salaries for non-resident individuals:  

Tax burden difference for each tax year = Tax already paid for income from wages and salaries – Taxable income for income from wages and salaries × 15 percent

Income from remuneration for services for non-resident individuals:  

Tax burden difference for each tax year = Tax already paid for income from remuneration for services – Taxable income for income from remuneration for services × 15 percent

Income from royalties for non-resident individuals:  

Tax burden difference for each tax year = Tax already paid for income from royalties – Taxable income for income from royalties × 15 percent

Income from franchise fees for non-resident individuals:  

Tax burden difference for each tax year = Tax already paid for income from franchise fees – Taxable income for income from franchise fees × 15 percent

Income from operations:  

Tax burden difference for each tax year = Tax already paid for income from operations – Taxable income for income from operations × 15 percent

Subsidized income from talent programs:  

 Tax burden difference for each tax year = Tax already paid for subsidized income from talent programs – Taxable income for subsidized income from talent programs × 15 percent

Applying for the GBA income tax subsidy in 2023 

The GBA IIT subsidies are processed once a year during the implementation period (from 2019 to 2023), and applications for the subsidy for each tax year are accepted the following year. 

If the applicant’s IIT is withheld by a withholding agent, then the withholding agent is generally responsible for applying for the subsidy. If the applicant declares and pays IIT by themselves, then they must file the application themselves as well.

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The dates of the application window are set each year by the Municipal Science and Technology Bureau and the Municipal Human Resources and Social Security Bureau. The corresponding Guangzhou government departments have not yet announced when they will begin to accept applications in 2023. 

Retroactive applications for the 2020 tax year, as well as applications for tax years 2021 and 2022, will be processed together during the application window in 2023. 

For the past few years, we have been helping businesses and their foreign employees in the GBA take advantage of the IIT subsidy by helping to identify suitable candidates, assisting with application procedures, and maintaining communication with local officials and government departments. For more information on the 2023 IIT subsidy applications, please contact china@dezshira.com. 

(This article was first published on June 30, 2023, and was last updated on August 28, 2023.)

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