China Raises IIT Special Additional Deduction Standards on Three Expenses

September 1, 2023 Posted by China Briefing Written by Qian Zhou Reading Time: 3 minutes

On August 31, 2023, the State Council released the Notice on Raising the Standard of Special Additional Deduction for Individual Income Tax (IIT), raising the pre-tax deduction standards on certain expenses related to child care, education, and elderly support in China.

According to the notice:

The special additional deduction standard for nursing expenses for children under three years old will be raised from RMB 1,000 per child per month to RMB 2,000 per child per month.
The special additional deduction standard for children’s education will be raised from RMB 1,000 per child per month to RMB 2,000 per child per month.
The special additional deduction standard for supporting the elderly will be raised from RMB 2,000 to RMB 3,000 per month. Among them, if pertaining to an only child, the deduction is according to the standard quota of RMB 3,000 yuan per month. In case of more than one child, a monthly deduction amount with their siblings, and the amount shared by each person cannot exceed RMB 1,500 per month.

The new deduction standards have retrospective effect from January 1, 2023, meaning that relevant taxpayers can also claim the tax benefits for the already passed January to August 2023 period during the annual IIT reconciliation (or annual IIT settlement).

What are IIT special additional deductions?

In 2019, special additional deductions for specific expenditures were introduced in China.

Under the amended IIT Law, the taxable income amount of a resident individual in China shall be the balance after deduction of the standard deduction (RMB 60,000 per year), as well as special deductions (social insurance and housing fund contributions), special additional deductions, and other deductions determined pursuant to the law, from the income amount of each tax year.

The special additional deductions cover seven types of expenses:

Nursing expenses for Children under three years old (newly added in 2022);
Children’s education expenses;
Continuing education expenses;
Healthcare costs for serious illness;
Housing loan interest;
Expenses for supporting the elderly; and
Housing rent.

The special additional deductions are available for both domestic and expatriate employees, as long as they satisfy the standards of resident taxpayers.

For more information about China’s special additional deductions, please refer to our China Briefing Article: China’s IIT Special Additional Deductions: An Explainer.

We summarize the new IIT special additional deduction standards in the table below:

IIT Special Additional Deductions in China (updated as of August 31, 2023)
Nursing expenses for children under 3 years old	Nursing expenses	RMB 2,000/month for each child (or RMB 24,000/year for each child)	• Standard deduction for each kid • 50/50 split between parents (guardian), or 100% deducted by one parent (guardian)
Children’s education expenses	• Pre-school education • Diploma education	RMB 2,000/month for each child (or RMB 24,000/year for each child)	• Standard deduction for each kid • 50/50 split between parents (guardian), or 100% deducted by one parent (guardian)
Continuing education expenses	Diploma education Professional qualification	RMB 400/month, up to 48 months (or RMB 4,800/year, up to four years) RMB 3,600 in the year when the related certificate issued	• Standard deduction • Parent could choose to claim such expenses for their child if it’s for diploma education
Healthcare costs for serious illness	Expenses recorded in the social medical insurance management system	Maximum RMB 80,000 based on actual basis	• Deduction on actual expenses • Can only deduct the medical cost that is over RMB 15,000 and borne by the individuals • Could claim for the spouse and the underaged children
Housing loan interest	First housing loan under taxpayer or spouse’s name	RMB 1,000/month up to 240 months (or RMB 12,000/year, up to 20 years)	• Standard deduction • Could be 50/50 split between the couple, or 100% deducted by one of them.
Expenses for supporting the elderly	• Parents over 60 years old • Other legal dependent	RMB 3,000/month (or RMB 36,000/year)	• Standard deduction in total, regardless of the actual number of the elderly • Could share among siblings, but each one can deduct no more than RMB 1,500/ month (or RMB 18,000/year)
Housing rent	• Taxpayer and spouse do not have a house in the city where they work	Three applicable deduction amounts based on working locations: • RMB 1,500/month (or RMB 18,000/year) • RMB 1,100/month (or RMB 13,200/year) • RMB 800/month (or RMB 9,600/year)	• Standard deduction • Shall be 100% deducted by one of the couples if they live in the same city • The couple can claim this deduction separately if they live in different cities and have no house in both cities

IIT Special Additional Deductions in China (updated as of August 31, 2023)

Item

Applicable scope

Deduction amount

Deduction method

Nursing expenses for children under 3 years old

Nursing expenses

RMB 2,000/month for each child (or RMB 24,000/year for each child)

• Standard deduction for each kid

• 50/50 split between parents (guardian), or 100% deducted by one parent (guardian)

Children’s education expenses

• Pre-school education

• Diploma education

RMB 2,000/month for each child (or RMB 24,000/year for each child)

• Standard deduction for each kid

• 50/50 split between parents (guardian), or 100% deducted by one parent (guardian)

Continuing education expenses

Diploma education Professional qualification

RMB 400/month, up to 48 months (or RMB 4,800/year, up to four years)

RMB 3,600 in the year when the related certificate issued

• Standard deduction

• Parent could choose to claim such expenses for their child if it’s for diploma education

Healthcare costs for serious illness

Expenses recorded in the social medical insurance management system

Maximum RMB 80,000 based on actual basis

• Deduction on actual expenses

• Can only deduct the medical cost that is over RMB 15,000 and borne by the individuals

• Could claim for the spouse and the underaged children

Housing loan interest

First housing loan under taxpayer or spouse’s name

RMB 1,000/month up to 240 months (or RMB 12,000/year, up to 20 years)

• Standard deduction

• Could be 50/50 split between the couple, or 100% deducted by one of them.

Expenses for supporting the elderly

• Parents over 60 years old

• Other legal dependent

RMB 3,000/month (or RMB 36,000/year)

• Standard deduction in total, regardless of the actual number of the elderly

• Could share among siblings, but each one can deduct no more than RMB 1,500/ month (or RMB 18,000/year)

Housing rent

• Taxpayer and spouse do not have a house in the city where they work

Three applicable deduction amounts based on working locations:

• RMB 1,500/month (or RMB 18,000/year)

• RMB 1,100/month (or RMB 13,200/year)

• RMB 800/month (or RMB 9,600/year)

• Standard deduction

• Shall be 100% deducted by one of the couples if they live in the same city

• The couple can claim this deduction separately if they live in different cities and have no house in both cities

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