Introduction

In the economic panorama of China for 2023, three pivotal themes shape fiscal policies and international business dynamics. Firstly, the State Taxation Administration's "Summary of Extended, Improved, and Optimized Tax and Fee Preferential Policies" introduces 70 strategic measures, aiming to stabilize markets and boost confidence. Secondly, Dongguan takes the spotlight with the "Provisional Implementation Measures related to Individual Income Tax Preferential Policies for the Greater Bay Area" and guidelines for IIT subsidies, emphasizing the region's commitment to attracting international talent. Lastly, the General Office of the Ministry of Commerce issues Shangbanzihan[2023] No. 496, addressing differential treatment, and No. 510, enhancing tax policies for foreign investment enterprises, demonstrating China's dedication to business equality and transparency. These themes collectively define the evolving landscape for businesses and investors in 2023.

Overview of the 2023 Summary

The State Taxation Administration (STA) of China, in a collaborative effort with the Ministry of Finance and other government bodies, has issued the "Summary of Extended, Improved, and Optimized Tax and Fee Preferential Policies (2023 version)" or the "2023 Summary." This comprehensive document provides a comprehensive overview and detailed explanation of the extended, optimised and improved tax incentives issued so far this year up to the end of October, including 70 tax and fee preferential policies that have been extended, enhanced, and optimized.

Additionally, it contains six official interpretations on tax policies and a section for frequently asked questions and answers. These policies fall into two broad categories: those with a specified implementation date and those lacking a sunset clause.

For example, MOF/STA PN [2023] No. 43 introduces the "super input Value-added Tax credit" policy for advanced manufacturing enterprises, scheduled for implementation until the conclusion of 2027. Conversely, policies such as MOF/STA PN [2023] No. 7 concentrate on optimizing the policy on super deduction of research and development expenditures without a specified termination date.

Taxpayers are strongly encouraged to explore the complete contents of the 2023 Summary to gain nuanced insights into the specifics of each policy, enabling them to effectively leverage these preferential measures. To read the official summary, please click this link.

Preferential Policies for the GBA

Dongguan, a pivotal city in the Guangdong-Hong Kong-Macau Greater Bay Area (GBA), has instituted substantial measures pertaining to Individual Income Tax (IIT) subsidies for overseas high-end and urgently needed talents. In accordance with Caishui[2023] No. 34, eligible individuals working in the GBA can receive a financial subsidy covering the portion of their IIT exceeding 15% of taxable income until December 31, 2027.

To facilitate the application process, Dongguan released Dongcaigui[2023] No. 3 and the "Guidelines of Dongguan on the recognition of overseas urgently-needed talents and the application for IIT subsidies". Key features include a window for applications from November 15 to December 25, 2023, and a maximum IIT subsidy cap of RMB 5 million per taxpayer per tax year. Notably, applicants must meet a minimum working day requirement of 90 for each year from 2020 to 2022.

Tax professionals and relevant taxpayers are strongly urged to meticulously review Circular 3 and Dongguan Guidelines for detailed information and eligibility criteria. The circular is effective from November 1, 2023, until December 31, 2025.

Equal Treatment for Domestic and Foreign Investors

In a concerted effort to enhance the business environment and promote high-level opening-up, the General Office of the Ministry of Commerce (MOFCOM) issued Shangbanzihan[2023] No. 496. This circular aims to eradicate unreasonable differential treatment between domestic and foreign investment in various facets, including administrative licenses, brand limitations, bidding participation, and access to local financial subsidy policies.

In a similar vein, Circular 510 was released to further enhance the implementation of tax reduction and exemption policies on the importation of equipment by foreign investment enterprises engaged in encouraged projects.

Conclusion

China's persistent endeavors to refine and optimize tax and fee preferential policies underscore the government's unwavering commitment to supporting economic growth and attracting foreign investment. As these policies continue to evolve, staying abreast of developments and receive professional support is imperative for businesses and investors to navigate the intricate China tax system effectively. 

At PHC Advisory, we can offer you full support on matters regarding doing business in Italy and Asia, or any other issues your business may face. If you would like to know more about policies relevant to your business in Italy or Asia, please contact us at info@phcadvisory.com. 

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Disclaimer

The content of this article is provided for informational purposes only, financial advice must be tailored to the specific circumstances on a case-by-case basis, and the contents of this article do not legally bind PHC Advisory with the reader in any way.

If you want to know more about tax regulations in China, please have a look at our previous articles: 

• Individual Tax Subsidies For Expats in the GBA

• Latest Financial and Tax Policies in China