China Regulatory Brief: Tax Relief for Retaining Talent, New Rules for Preventing False Data

July 7, 2017 Posted by China Briefing Reading Time: 4 minutes

China to offer tax relief to help companies retain talent

China is expected to implement a new series of preferential individual income tax (IIT) rates in an effort to help high performing firms retain executives and high-earning talent.

Tax relief will be offered on non-cash income equity incentives, such as stock options, the types of remuneration more commonly comprising executive pay packages.

Many firms in China struggle to retain top talent, as they are attracted by more promising prospects overseas. China levies a 45 percent IIT rate on the top income bracket, compared to 17 percent in Hong Kong, and 20 percent in Singapore.

China has a seven tier progressive IIT regime, and many businesses have been waiting for government policy for rewarding staff on the top tiers of the system.

China releases new rule to prevent false statistical data

China has released regulation aimed at preventing the falsification of economic data by local governments, following many incidents of governments in regions such as Liaoning, Jilin, and Inner Mongolia inflating their statistics as the country’s economy slows.

The State Council’s new law stipulates that any organization falsifying data will be punished. The law also disallows local governments from intervening in statistical investigations and information collection by statisticians. It also stops organizations from using statistical information not yet put in the public domain for means of profit.

Violators engaging in statistical inquiry abuse for profit will be fined two to four times illegal earnings amounting to RMB 500,000 (US$73,530) or more. Earnings amounting to less than RMB 500,000 will be subject to fines of up to RMB 200,000 (US$29,410).

Statistics derived from local governments exceeded more than RMB 2.7 trillion (US$397 billion) than those reported by the central government last year.

The regulation will come into effect on August 1 this year.

China’s second tier cities offer incentives to attract new graduates

Some of China’s second tier cities are offering subsidies to attract top graduates, as many head to bigger cities such as Beijing, Shanghai, and Guangzhou to find work.

Cities such as Changsha are offering housing subsidies of RMB 30,000-60,000 (US$4,410-8,820) to graduates with at least a master’s degree who decide to settle there. Rent and living allowances are also offered for the first two years.

Almost 45 percent of respondents to an HR survey said that they chose to live in bigger first tier cities, while a similar amount chose second tier cities.

7.95 million students graduated from China’s universities this year, a 300,000 increase year-on-year, accounting for more than half of this year’s new labor force.

Meanwhile, cities such as Beijing and Shanghai have tightened their household registration system to tackle the increasing flow of migrant workers.

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