With the latest round of tax incentives, China has intensified efforts to lure talent to the Greater Bay Area from Hong Kong and abroad to make it globally competitive.
Special subsidies will be granted to offset individual income tax differentials between China and Hong Kong, China’s Ministry of Finance said over the weekend. The move aims to keep income taxes as low as what employees would pay in Hong Kong, where they are capped at 17 percent.
Those eligible for the subsidies include talent and professionals with skills that may be in short supply in the GBA. The subsidies will be exempted from individual income tax as well.
The policy would take effect from now on until the end of 2023 and applies to nine cities in Guangdong province – Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing.
Details of the policy are expected soon, with local governments in Guangdong expected to identify what talent is eligible and how to provide subsidies.
“The measure will alleviate the tax burden for overseas talent working in the GBA. This will in turn help enlarge the talent pool in the bay area,” the statement said.
The new policy will override the tax breaks already in place in Hengqin, a special economic zone in Zhuhai, and Qianhai, another economic zone in Shenzhen. The tax breaks in the two mainland zones ensure Hong Kongers pay the same amount of tax as if they were under the Hong Kong tax system.
And there’s more…
Besides the subsidies, Chinese financial regulators also rolled out a reduction of the amount of individual income tax paid on income earned overseas.
Those without a home address in China or those that have lived in the country for less than six years in a row and have stayed for less than 183 days in a year can be exempted from individual income tax on their income from outside China.
In the past, these individuals would have start to pay the tax after five years.
The new rule also stipulates that staying less than 24 hours in China would not be counted as one day.
“I don’t think there’ll be any hesitation to travel in and out China from a tax angle… Before, even if you spent a minute or an hour in China, it’s still counted as one day,” said Ms Catherine Tsang, a partner at PwC Hong Kong.
She said the move aims to promote mobility in the GBA as workers need not bear additional individual income tax.
The Greater Bay Area is a grand plan proposed by the central government in Beijing to link nine mainland cities and two special administrative regions, Hong Kong and Macau, together to form a regional powerhouse to compete with the world.
It aims to promote free flow of capital, people, goods and information within the bay area to make it more integrated.
Last month, the central government rolled out the outline development plan for the bay area. The blueprint has placed great emphasis on innovation and technology, aiming to rival with California’s Silicon Valley.
The Greater Bay Area is home to 70 million people, who contribute 12 percent, or US$1.6 trillion, of China’s GDP.