Aug 2023 - The extension of the preferential policy for IIT

We summarize down below key takeaways.

Annual Bonuses

• IIT on annual bonuses is calculated out of the normal monthly salary thus enjoying a preferential tax treatment
• Resident individual: the annual bonuses shall be separately taxed on the basis of the amount by dividing the annual bonuses by 12 months
• Non-Resident individual: the several months bonuses obtained in one month shall be amortized in 6 months for tax calculation, without deductions

Equity incentives

• Mainly including stock options, stock appreciation rights, restricted stocks and equity rewards
• Resident individual: the equity incentives shall be separately taxed on the basis of the full amount
• Non-Resident individual: the equity incentives shall be amortized in six months for tax calculation, without deductions

Point of attention

• To enjoy the preferential policy for equity incentives, the Company shall apply for registration with local tax bureau (assuming employees as China tax resident individuals).

If you need further information or assistance, please don’t hesitate to contact us. We’ll be happy to help!

References:

• Ministry of Finance and State Administration of Taxation, [2023] No.25: Notice on the continuation of the implementation of the relevant individual income tax preferential policies relating to Equity Incentives.
• Ministry of Finance and State Administration of Taxation, [2023] No.30: Notice on the continuation of the implementation of the relevant individual income tax preferential policies for Annual Bonuses.

Should you have questions as to how these measures will impact you, please do not hesitate to reach out to your Mazars contact.