According to the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area, one of the region’s strategic positioning is to grow into an international scientific and technological innovation center with global influence. As talent is the basic driving force for science and technology development and innovation, the development of the Guangdong-Hong Kong-Macao Greater Bay Area will rely on innovative system and mechanism to stimulate the innovation vitality of talents.
On 14 March 2019, China’s Ministry of Finance and State Administration of Taxation jointly issued a Notice on Individual Income Tax Incentives for Guangdong-Hong Kong-Macau Greater Bay Area. Guangdong Province and Shenzhen Municipality shall grant subsidy overseas (including Hong Kong, Macau and Taiwan, same hereinafter) high-end talents and talents in short supply working in the Greater Bay Area, and such subsidy, equivalent to the individual income tax difference between Mainland and Hong Kong, will be exempted from individual income tax.
Following the above policy, Shenzhen Municipality issued two documents detailing the implementation of the IIT subsidy application for high-end talents and talents in short supply working in Shenzhen:
- Notice on the Implementation of Preferential Individual Income Tax Policies for the Guangdong-Hong Kong-Macau Greater Bay Area, effective since 27 March 2020.
- Notice on Promulgation of the Guidelines for the Application for Individual Income Tax Subsidies for Overseas High-end Talent and Talent in Short Supply in Shenzhen for Tax Year 2019, effective since 10 July 2020.
Based on the instructions given by the government of Guangdong Province, the preferential policy refines the detailed conditions and criteria for applicants according to the actual situation in Shenzhen. The promulgation of the above two documents marks the official landing of the Greater Bay Area (GBA) Individual Income Tax rebate in Shenzhen, which will effectively help Shenzhen acquire more talents.
To be eligible for the IIT subsidy, an applicant should first meet the basic requirements in terms of identity and his/her employment condition. Under the guidelines provided by the Shenzhen Government, an applicant should fall in one of the following categories:
- A permanent resident of Hong Kong or Macao;
- A mainland resident having settled down in Hong Kong or Macao (having deregistered his Mainland household registration)
- A Hong Kong resident under admission schemes for talent, professionals and entrepreneurs;
- A resident in Taiwan region;
- Foreign nationals;
- An overseas returnee who has obtained the right of long-term residence in a foreign country;
- Overseas Chinese.
In addition, the applicant should prove that he/she has entered into an employment contract with an employer in Shenzhen or has signed a dispatch agreement with an overseas employer and an entity in Shenzhen. For certain qualified applicants who provide independent personal services in Shenzhen, they must provide their corresponding service contract with a taxpayer in Shenzhen.
Besides the above basic requirements, an applicant should meet any of the following conditions:
- Being selected for national, provincial or municipal major talent projects;
- Being an overseas high-level talent recognized by the State, the Province or the Municipality.
- Obtaining a Guangdong Superior Talent Card of Guangdong Province;
- Talent with permanent residency in China, work permit for foreigners working in China (Type A and Type B) or confirmation letter for foreign high-end talent;
- Any member of a scientific research team or manager at or above the middle level of a national, provincial, or municipal major innovation platform;
- Any member of a scientific research and technology team or manager above the middle level in an institution of higher learning, scientific research institute, hospital or any other relevant institution, or any member of a team undertaking a major vertical project under research at or above the municipal level, or any leader for a key discipline or key specialty at or above the municipal level.
- Managers above the middle level, scientific research team members, technical and skill backbones and excellent young talent of headquarters enterprises, top global 500 enterprises and their branches and high-tech enterprises, large backbone enterprises, listed enterprises and enterprises included in the pool for cultivation and innovation-oriented high growth sci-tech SMEs;
- Managers above the middle level, members of scientific research team, technical and technical backbones and excellent young talent who start business or are employed in key industries and fields to be developed in Shenzhen, and have not passed or failed to pass within the time limit the acceptance inspection of a project supported by the special fund for the development of a strategic emerging industry in Shenzhen that they are responsible for or participate in within the latest three years.
Key Points on the Guidelines for Application in Shenzhen
- It should be noted that the subsidy is only granted to applicants paying taxes exceeding 15% of the taxable income. Foreign nationals are, in addition, subject to a minimum annual taxable income threshold of RMB500,000.
- Once the eligible applicants are identified, proper travel schedules should be maintained by the applicants to ensure that they stay in Shenzhen for at least 90 days during a tax year.
- Successful applicants cannot enjoy other IIT-related talent preferential policies in Shenzhen. Meanwhile, the details of IIT policy in GBA may vary in different cities. The criteria, requirements, calculation methods and procedures in Shenzhen may not be applicable to other cities in the GBA.
- The applicant’s credit information may be inquired through channels such as Shenzhen Credit Platform.
Calculation of IIT Subsidy
The basic formula is that the IIT subsidy should equal to the tax paid according to the PRC IIT Law deducted by the estimated tax calculated at 15% of the taxable income, so that the taxpayer would have an effective IIT rate of 15%:
IIT Subsidy=Tax Paid – (15% x taxable income)
Taxable Income refers to the following income categories according to the Individual Income Tax Law of the People’s Republic of China:
- Income from wages and salaries;
- Income from remuneration for labor services.,
- Income from authorial remuneration;
- Income from royalties;
- Business income;
- Subsidized income from the talent projects.
Estimated tax amount means the tax amount payable for the taxpayer’s individual income derived in Shenzhen within the tax year computed pursuant to the tax laws of Hong Kong. It will be calculated according to the standard tax rate method, which is, estimated tax amount = taxable income of the taxpayer in Shenzhen x 15%.
What CW Can Offer
Our multilingual professionals can help to facilitate communications throughout the application process and enable us to provide tailored services to our clients. We offer:
- Guidance throughout the whole application process;
- Professional consultation services to help you resolve your concerns and difficulties;
- Collect, review and file documents and materials according to the specific policy requirements;
- Organize training sessions for each client before submitting their online applications.
If any assistance is required, we are here to listen and help. Please do not hesitate to get in touch if you have any questions.
Written by China Consultancy Team, CW CPA