Employee Allowances and Benefits Now Taxable

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Sept. 17 – China’s State Administration of Taxation (SAT) has announced that it will begin taxing certain employee allowances like telecommunications and transportation as part of its general campaign to require more companies to report their tax activities in detail and tighten tax collection.

According to the SAT, twenty percent of an employee’s telecommunications allowance and 30 percent of auto allowance will be subject to tax should there be no local standards for determining taxable and non-taxable amounts. Taxable income also includes company payments for commercial insurance and termination compensation.

Shanghai Daily reports that this was the first time the SAT specified details on taxable employee benefits. The SAT also details that companies will not be allowed to minus employee retirement benefits from corporate income in addition to restricting rules on fuel tax payments.

The global economic slowdown has lowered China’s tax revenue by 3.5 percent during the first seven months of the year. Moreover, China’s economy is now running on the back of its massive stimulus plan and the government will need all its available sources of revenues to be effective and efficient.

For further information on tax issues email Sabrina Zhang, national tax partner for Dezan Shira & Associates in China, at tax@dezshira.com.