Tax Exemptions Welcomed By Foreigners In China, But…

[dropcap]C[/dropcap]hina’s last-minute decision to extend tax exemptions on expatriate employee allowances for two more years has been welcomed by foreign business groups, though worries about rising costs, coronavirus-related travel restrictions, and market access remain.
 
Joerg Wuttke, president of the European Chamber of Commerce in China, said the extension of non-taxable allowances, announced by the Ministry of Finance and the State Taxation Administration on Friday, is highly significant for foreign firms and benefits China as well.

We believe this solution provided by the Chinese authorities will stem the flow of foreign talent from China, which will help maintain a high level of competition and innovation within the Chinese market, while also improving international relations in general, he said in an online statement released on Sunday.

The European chamber, which has 1,700 company members, has lobbied hard for the retention of the tax breaks, including in a letter to China’s top leadership last year.

 
The American Chamber of Commerce in China (AmCham China) also welcomed the decision, which helps companies better retain and attract certain critical expatriate employees, while managing operational costs.

This helps China attract foreign investment while also ensuring that the best talent, local and abroad, can participate in this dynamic and growing economy, Colm Rafferty, AmCham China Chairman, said on Tuesday.

But as the deadline approached, foreign companies became increasingly worried. More than a third of multinational firms in Shanghai said in April last year they were considering moving all or part of their operation out of China.

The European chamber estimated foreign firms could face cost increases of up to 76.9 percent for each employee with two children in school.

Roughly half of UK companies state that attractive [individual income tax] policies would make them more likely to consider investing in particular cities, the British Chamber of Commerce in China said last week.

Despite concern over tax in recent years, China remains the most attractive global destination for foreign investors. Its utilized foreign direct investment (FDI) rose by 21.4 percent from a year earlier to US$157.2 billion in the first 11 months of last year.