China: Income tax incentives for highly skilled employees, Greater Bay Area

Circular No. 1 is effective from 1 January 2020 through 31 December 2023.

Circular No. 1 is effective from 1 January 2020 through 31 December 2023.

Several Guangzhou municipal authorities in June 2021 jointly issued implementation guidance (Suicaiguizi [2021] No. 1) for the Guangdong-Hong Kong-Macau Greater Bay Area (GBA) preferential individual income tax incentives for the years from 2020 through 2023.

The guidance is expected to help businesses to gain access to the tax incentives.


The Ministry of Finance and the State Taxation Administration in 2019 introduced Circular (Cai Shui [2019]) No. 31 setting out GBA preferential individual income tax policies in the form of subsidies. Subsequently, the tax authorities in Guangdong and Guangzhou issued implementation guidance—Yue Cai Shui [2019] No. 2 and Suicaiguizi [2019] No. 5 (Circular No. 5). The two circulars were implemented on a pilot basis from 1 January 2019 for a one-year period, which was then extended in provincial-level implementation guidance from the Guangdong province finance department and other authorities at the end of 2020.

Now the Guangzhou municipal authorities have issued guidance in Suicaiguizi [2021] No. 1 (Circular No. 1), based on the expired Circular No. 5, to regulate incentives implementation in Guangzhou for the years from 2020 to 2023.

Compared with Circular No. 5, Circular No. 1 includes certain changes, such as:

  • An enhanced list of foreign individuals with high-end and urgently needed skills
  • Refined implementation rules

Circular No. 1 is effective from 1 January 2020 through 31 December 2023.

KPMG observation

With Circular No. 1, businesses need to consider the following points:

  • “Working in Guangzhou for a minimum of 90 days during a tax year” is a critical requirement for subsidy application. The authorities seem to be taking a strict approach starting from the application for the 2020 subsidy, while a travel diary was not required in the application for the 2019 subsidy. As such, applicants working under dual-employment arrangements or those who frequently travel outside of Guangzhou need to keep track of their travel days and summarize their working days in Guangzhou during the tax year concerned in order to assess whether they meet the requirements. 
  • Applicants need to be prepared in advance (e.g., determine that the “talent” qualification” is satisfied for the tax year concerned) to avoid missing the subsidy application for that year. A number of authorities have already tightened the application requirements for “talent” qualification.
  • Filed income tax returns and correctly paid income tax are important pre-requisites for the subsidy application. This requires employers and their employees to be familiar with the incentives and work together to reach compliance. In dealing with 2019 subsidy applications, it was observed that a number of obstacles hindered the applications to proceed. These included, for instance, a failure to file monthly or annual individual income tax returns properly and timely; employee reluctance to assist employers in obtaining the subsidy in instances when their individual income tax liability was borne by the employer. With all these considerations in mind, businesses need to engage with foreign employees and obtain the relevant documents (prepared in advance), and complete the tax return filing, to secure the success of the subsidy application. 

For more information contact a KPMG tax professional:

David Ling | +1 609 874 4381 |


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