People’s Republic of China – Coronavirus Spurs New Preferential Individual Income Tax Policy
People’s Republic of China – Coronavirus Spurs New Pref
The Ministry of Finance and State Taxation Administration of the People’s Republic of China have issued new tax measures in an effort to prevent and control the spread of COVID-19. The new measures concern individual income tax (IIT) exemptions/relief for employer-provided temporary subsidies and bonuses received by medical and epidemic-prevention staff and the in-kind provision of things like medicines, medical supplies, and protective equipment. They also concern donations in cash or in kind made by individuals through non-profit social organisations.
The Ministry of Finance and State Taxation Administration of the People’s Republic of China have issued new tax measures in an effort to prevent and control the spread of COVID-19.
Announcement on Tax Policies on Donations to Support the Prevention and Control of the COVID-19 (“Announcement No. 9”) and Announcement on Individual Income Tax Policy to Support the Prevention and Control of COVID-19 (“Announcement No. 10”) were issued on 6 February 2020 to provide guidance on the Individual Income Tax (IIT) treatment for donations made and allowances paid during the outbreak.
These announcements have retroactive effect from 1 January 20201.
WHY THIS MATTERS
The preferential IIT policies contained in these announcements provide timely guidance on the tax treatment of subsidies/payments from employers to employees/staff and donations from individuals made for purposes of preventing and controlling COVID-19.
The new policies aim at assisting companies and individuals to overcome difficulties experienced during the outbreak, and boost confidence in the face of the epidemic.
Preferential IIT Treatment: Key Points
Announcement No. 9 and Announcement No. 10 stipulate new policies concerning the preferential IIT treatment as noted below.
IIT Exemption on Receipt of the Following Types of Income
- Temporary subsidies and bonuses2 received by medical and epidemic-prevention staff engaged in prevention and control activities that are in accordance with the prescribed standards of the local government authorities.
- Medicines, medical supplies, protective equipment, and other related benefits-in-kind, excluding cash, provided by employers to their employees for prevention of COVID-19.
Full Tax Deductibility of the Following Types of Donations Made by Individuals
- Donations in cash or in kind made by individuals through non-profit social organisations or governmental authorities at the county level or above or their subordinate departments.
- Donations in kind3 made directly by individuals to designated hospitals undertaking the tasks of preventing and treating COVID-19.
At this juncture, IIT treatment of cash allowances paid to employees during the COVID-10 epidemic is unclear.
The KPMG International member firm in China will closely monitor developments on new tax policies and endeavour to inform readers of GMS Flash Alert of any relevant updates.
1 Validity of the policy will be further assessed in accordance with the development of COVID-19.
2 The prescribed standards include guidelines issued by all government-level authorities in respect of the relevant subsidy and bonus to be awarded.
3 The receipt issued by the hospital is required for a tax deduction claim.
The information contained in this newsletter was submitted by the KPMG International member firm in the People’s Republic of China.
To subscribe to GMS Flash Alert, fill out the subscription form.
New Thought Leadership from KPMG: “Coronavirus: Protect Your Staff and Your Business”
The KPMG People Services team in the People’s Republic of China has developed a booklet (“Coronavirus: Protect Your Staff and Your Business” (February 2020)) highlighting the key considerations for protecting globally-mobile staff and mitigating the impact on business operations from high level tax, legal, and immigration perspectives.
© 2022 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and KPMG Huazhen, a Sino-foreign joint venture in China, are member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.