Shenzhen Extends Application Deadline for 2021/2022 IIT Subsidy to October 20

Shenzhen has extended the application deadline for the individual income tax (IIT) subsidy for foreign and in-demand talent from September 30 to October 20, 2023. At the end of August, the city issued updated application guidelines for the IIT subsidy and officially began to accept applications for the subsidy. The guidelines will be valid for a period of one year.

The IIT subsidy, which is available to high-end foreign talent and in-demand talent living in the nine mainland cities of the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), has been on a two-year hiatus due to the pandemic. Then in June of this year, the Guangdong Provincial Department of Finance informed the municipal governments of the nine mainland GBA cities to resume the IIT subsidy program. China’s Ministry of Finance later announced that the IIT subsidy will continue to be implemented until the end of 2027, extending it from its original expiry date of December 31, 2023.

Shenzhen is currently the only city in the GBA that has officially started accepting applications for the IIT subsidy for the 2021 and 2022 tax years, and released accompanying application guidelines. Foshan and Guangzhou have both released draft guidelines for public comment over the summer, but have yet to release the final version or begin accepting applications.

Below, we provide an overview of Shenzhen’s latest guidelines for applying for the IIT subsidy for the 2021 and 2022 tax years.

Eligibility requirements in Shenzhen

The eligibility requirements for the applicants and their companies is largely in line with the general guidelines for Guangdong province, which we outlined in a previous article.

General eligibility requirements

To be eligible for the IIT subsidy, applicants must be living and working in Shenzhen, and be a permanent resident of Hong Kong and Macao, 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.

The identity documentation required for the application depends on the applicant’s nationality and residence status:

Candidates are eligible for the IIT subsidy if they are employed in Shenzhen and meet one of the following conditions:

1. Have signed an employment contract with a Shenzhen employer.
2. Be dispatched by an overseas employer. In this case, the overseas employer must have signed a dispatch contract with the unit in Shenzhen.
3. Provide independent personal services and have a signed service contract with a Shenzhen taxpayer.

Candidates who have worked in Shenzhen for at least 90 days within an applicable tax year can also apply for the IIT subsidy. If the candidate’s employer changes, then they can still apply for the IIT subsidy through the employer for whom they worked at least 90 days in the applicable tax year.

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Candidates must also pay taxes in Shenzhen, and the amount of tax already paid must be greater than the “estimated tax amount” (the tax payable calculated in accordance with Hong Kong tax laws on the declarer’s personal income in Shenzhen City—see below).

Finally, the applicant must also be in compliance with Shenzhen’s various laws, scientific research ethics, and scientific research integrity.

The applicant must also not have been engaged in any cases of fraud or fiscal criminality or have violated scientific research ethics or integrity, or engaged in any other dishonest behaviors in the last five years from the time of the application.

Applicants can also not enjoy the IIT subsidy if they have already applied to any of the following preferential policies in the same tax year:

1. The Shenzhen Industrial Development and Innovation Talent Award;
2. The Shenzhen high-level talent rewards and subsidies;
3. The “Pengcheng Peacock Plan” special position reward; or
4. Other talent rewards or subsidies of similar nature in Shenzhen.

Eligibility requirements for high-end foreign talent

The IIT subsidy is available to foreign talent in Shenzhen who meet one of the following conditions and work in scientific and technological innovation, key development industries, or philosophy and social science fields.

More specifically, these fields refer to:

1. In scientific and technological innovation:
   1. Major innovation platforms at the national, provincial or municipal levels;
   2. Colleges and universities, scientific research institutions, medical institutions, and public health institutions; and
   3. High-tech enterprises, “specialized, refined, special, and innovative” companies (专精特新 – referring to companies with strong business specialization, refined management, specialized processes, and a high level of innovation), and individual “champion” companies in the manufacturing industry (leading companies with a long-term focus on certain product segments in the manufacturing industry).
2. Key development industries
   1. Strategic emerging industries; and
   2. Modern service industries;
3. Philosophy and social science: Philosophy and social science research institutions, Party school administrative colleges, and research institutions affiliated to the Party and government departments.

Within these fields, the candidates must meet one of the following requirements:

1. Be selected for major national, provincial, and municipal talent projects;
2. Be an overseas high-level talent recognized by the country, province, and city;
3. Hold Guangdong Province’s “Excellent Talent Guangdong Card”;
4. Hold Shenzhen’s “Pengcheng Talent Card”;
5. Hold a Category A Foreigner’s Work Permit in China (excluding those who obtain the Category A Foreigner’s Work Permit solely for “the average wage income is not less than six times the average social wage in Shenzhen in the previous year”); or
6. Hold a “Confirmation Letter for Foreign High-level Talents”, “Confirmation Letter for High-level Foreign Talents in Guangdong Province”, or “Confirmation Letter for High-level Foreign Talents from Guangdong Province, Hong Kong, Macao and Taiwan”.

Eligibility requirements for in-demand talent

To be considered “in-demand talent”, candidates must be overseas scientific research talent, core technical skills talent, or senior management talent working in scientific and technological innovation, key development industries, or philosophy and social science fields.

The positions that the candidate must hold within these fields have been further specified as:

1. In the field of scientific and technological innovation:
   1. Members of the scientific research, engineering, operation, and maintenance team of major national, provincial or municipal innovation platforms;
   2. Members of scientific research technical teams in colleges and universities, scientific research institutions, medical institutions, and public health institutions or team members undertaking major vertical research projects, leaders of key disciplines and key specialties, and core medical and health technology technical talent at or above the municipal level; and
   3. Scientific research team members, core technical talent, or senior managers of high-tech enterprises, “specialized, refined, special, and innovative” companies, and individual “champion” companies in the manufacturing industry.
2. In key development industries:
   1. Scientific research team members, core technical talent, and senior managers in strategic emerging industries;
   2. Scientific research team members, core technical staff, and senior managers in the modern service industry; and
   3. Philosophy and social science fields: Personnel engaged in philosophy and social science research or teaching in colleges and universities, philosophy and social science research institutions, Party school administrative colleges, and research institutions affiliated to Party and government departments.

Eligibility requirements for employers

The employers of the foreign high-end or in-demand talent must be registered in Shenzhen for the talent to be able to apply for the subsidy.

The company must also be compliant with laws and regulations, and not be under any of the following circumstances at the time of the application:

1. Have records of major tax violations in the past five years;
2. Be included in the list of abnormal business operations;
3. Have records of administrative penalties that are currently being implemented, have not been lifted, and have not been rectified;
4. Be listed as an “untrustworthy” entity and subject to some form of penalty; and
5. Be included in the “seriously dishonest entities” list.

Calculating the IIT subsidy

During the tax year in question, the IIT subsidy amount that the candidate can apply for is calculated by deducting the “estimated tax amount” from the amount of tax paid in Shenzhen. The resulting amount will then be exempt from IIT, thus lowering the person’s overall IIT burden.

           IIT subsidy amount = Amount of tax paid in Shenzhen – estimated tax amount

The amount of tax paid in Shenzhen refers to the amount of IIT that a candidate has paid in Shenzhen any of the following income types:

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.

The estimated tax amount refers to the tax payable calculated in accordance with Hong Kong tax laws on the declarer’s personal income in Shenzhen. The estimated tax amount for the tax year 2021 and 2022 is calculated according to the standard tax rate method, that is:

Estimated tax amount = Declarer’s taxable income × 15%

The IIT subsidy amount is based on individual income items, where the subsidies are calculated on an item-by-item basis and then consolidated (comprehensive income is calculated together). See our previous article for the IIT subsidy calculation for each income item.

The IIT subsidy is capped at RMB 5 million.

Application and review procedures

Applicants and their employers must register as users on the Guangdong Province Unified Identity Authentication Platform. Individual users must undergo real-name verification.

Applications for the IIT subsidy for the 2021 and 2022 tax years are open from September 1 to October 20, 2023.

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Declarers can log on to the Natural Person E-Tax Bureau and use the “Featured Application” – “Talent Subsidy (Reward) Individual Tax Data” query page to view tax payments by year and authorize the (GBA IIT subsidy) authority to view the tax information.

The employer should review the applicant’s application information and materials and make a written explanation and commitment before submitting the application. If the applicant provides personal services, then they do not need to submit the application through the employer (although if the tax paid includes tax paid on wages and salary, then the declaration must be made through corresponding company).

The authorities will make a decision on whether to accept or reject the application within five working days of receiving the application. If the application materials are incomplete, the applicant or employer will be notified to make corrections, and they are then required to provide the missing or correct materials within seven working days. The application will be rejected if they are not provided in time.

The authorities will provide a preliminary opinion on the application within 30 days of accepting the application. This period may be extended for another 30 days if the situation is complicated. If the application fails the preliminary review, it will be returned and the applicant or applicant will be notified.

After passing the preliminary review, the applicant will be included in the list of subsidies to be issued, and the authorities will calculate the subsidy amount. The applicant will be notified if the subsidy amount that the authorities calculate is inconsistent with the amount for which they applied.

The applications that passed the preliminary review will then undergo a centralized review, after which the authorities will propose a list of talent to enjoy the IIT subsidy.

After calculating the subsidy amount, the authority that accepted the application will allocate the funds directly to the financial social security card account or other personal bank account designated by the applicant through the fiscal and treasury centralized payment system.

Making the requisite preparations

Based upon the application guidelines and past experience of applications in the nine cities in the GBA, we recommend applicants make the following preparations prior to submitting the application:

• Assess your eligibility for the IIT subsidy.
• Coordinate with your employer if you received wages or a salary from them. In Shenzhen, both the applicant and the company need to register for an account on the specified online service platform. Your company’s support and involvement in the application process are essential.
• Ensure consistency in the personal information submitted. Personal information, such as type of identity document, ID number, and the spelling of the name, which is used to register an account on the specified online service platform, should be consistent with the personal information used for IIT declaration. If you used different identity information to declare and pay taxes, then you need to reach out to the tax department to correct and align the identity information. This often happens when an applicant’s passport is renewed.
• Complete the Annual Final Tax Settlement on Comprehensive Individual Income in time for the relevant tax year.
• Make sure you have a valid Chinese bank card to receive the subsidy.

Dezan Shira & Associates has an experienced team of tax accountants, lawyers, and ex-tax officials based in the GBA who can help with matters related to foreigners’ IIT calculation and subsidy application, as well as derive practical solutions to your human resource arrangement needs in the GBA. Please feel free to email us at China@dezshira.com

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