What are the expiring China tax incentives by the end of 2021?

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This article will explain a couple of China tax incentives that will expire on December 31, 2021.

VAT increases from 1% to 3% for small-scale taxpayers

New Policy:
VAT for small-scale taxpayers will rise from 1% to 3% beginning January 1, 2022.
The levy-free concession continues to be of universal benefit.

Previous Policy:
Because of the epidemic, VAT small-scale taxpayers subject to tax sales rates with a levy rate of 3% must pay tax with a levy rate of 1% from April 1, 2021, to December 31, 2021, and VAT small-scale taxpayers are subject to a 3 percent prepayment rate must pre-pay 1%.

Foreigners no longer qualify for any tax breaks on housing allowances, language training fees, or child education allowances.

New Policy:
Foreign individuals will no longer be eligible for preferential tax treatment beginning January 1, 2022, for:

  • housing allowances
  • language training fees
  • children’s education fee allowances

They are still eligible for special additional deductions under the regulations.

Previous Policy:
According to the regulations, foreign residents in China can enjoy special additional deductions for personal income tax purposes or one tax exemption for allowances such as housing allowances, language training fees, or children’s education fees from January 1, 2019, to December 31, 2021. (they can not choose all).
Once an individual has chosen an exemption, it cannot be changed within one tax year.

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