China to Tax Foreign Subsidies Starting Next Year

Beijing Central Business District, China
[Image source=Yonhap News]

[Asia Economy Reporter Song Seung-seop] Expatriates of companies operating in China will have to pay personal income tax on subsidies received from their Korean headquarters starting next month.

According to the Korean Embassy in China on the 20th, the revised "Policy on Foreigners' Personal Subsidies" will be implemented in China starting January.

The policy aims to abolish the personal income tax exemption on subsidies received by foreigners. This applies to housing subsidies, language education expenses, and child education subsidies. According to the regulations, special additional deductions must be applied. It applies not only to Koreans but to all foreigners in China. After a three-year grace period, it will be fully enforced in 2022.

The embassy predicted that the new policy will increase the income tax burden on expatriates. It also stated that operating costs for companies operating in China may rise.