Explore our services, insights and latest news.
An executive meeting of the State Council held on December 29th took place in which an important decision was announced stating the prolongation of applying several preferential individual income tax (IIT) policies.
In order to reduce the burden of individual income tax and relieve the pressure for low- and middle-income taxpayers’ categories, State Council executive meeting decided that:
1. The policy of an annual one-off bonus to not be incorporated into the comprehensive income for tax calculation purposes and the implementation of separate taxation policy for an annual bonus will be extended until the end of 2023.
The calculation formula for an annual bonus is:
Tax payable = annual one-time bonus amount * applicable tax rate – quick deduction
2. Supplementary individual income taxes that must be paid when completing the annual IIT filing can be exempt for the amount not exceeding RMB 400. This policy is also applicable for those whose annual income does not exceed RMB 120,000, and it will be extended until the end of 2023.
3. Preferential tax policies are extended for equity-based incentives of listed companies until the end of 2022.
The abovementioned three policies are expected to reduce taxes by RMB 110 billion a year. This regulation update comes at a crucial time, especially for foreign employees in China, as the preferential IIT policy in relation to certain tax-exempt items expires at the end of 2021. Separate treatment of an annual bonus can reduce the overall tax burden businesses and individuals are going to face from 2022 onwards.
If you would like to know more about the most recent financial policy developments in China, please contact us at info@phcadvisory.com.
Recent court rulings in China have established that artificial intelligence replacement is not a legitimate reason to terminate employees, thus imposing a critical balance between technological advancement and labor rights protection. The legal principle emerging from such cases sends a clear signal to both domestic and foreign enterprises: automation cannot become a shortcut to bypass
China's economy delivered a robust start to 2026, with gross domestic product expanding 5.0% year-on-year in the first quarter to 33.42 trillion CNY (approximately US$4.9 trillion), according to data released by the National Bureau of Statistics (NBS) on April 16. The growth excedeed market expectations of 4.8% and accelerated from 4.5% in the previous quarter.
China's economy in 2025 achieved its official growth target of around 5%, but the underlying trajectory showed clear deceleration and structural imbalance. Quarterly GDP growth slowed from 5.4% year-on-year in Q1 to 4.5% in Q4, reflecting weakening domestic demand even as external and industrial sectors remained relatively resilient. Across the year, a consistent pattern emerged:
