The Greater Bay Area (GBA) initiative is an ambitious scheme to link the nine cities in Mainland and 2 Special Administrative Regions, namely Hong Kong and Macau, into an integrated economy and world-class business hub.
In 2019, by deepening reform, prioritizing innovation, and accelerating connectivity, the development of GBA has gained considerable momentum. Having the right talent to help develop the GBA economy is important. To address this issue, for “High-end Talents” and “Talents in Short Supply”, the Municipal Governments in the GBA will grant subsidies to the residents for the Individual Income Tax (IIT) paid exceeding 15% of the taxable income.
IIT subsidy application criteria
To be eligible for the IIT subsidy application, ALL the following 3 Basic Conditions must be met:
- Hong Kong or Macau permanent residents, Hong Kong residents under the Hong Kong Immigration Admission Schemes for Talents, Professionals and Entrepreneurs, Taiwan residents, foreigners, or Chinese students or overseas Chinese who obtained long term residency abroad;
- Work in one of the nine GBA cities and pay taxes according to the IIT law; and
- Compliance with laws and regulations, ethics and integrity relating to scientific research.
The definitions of “High-end Talent” and “Talent in Short Supply” vary among the nine Mainland GBA cities, of which only Guangzhou and 3 other cities have finalized the local implementation rules.
Guangzhou rules provide a detailed list of both “High-end Talent” and “Talent in Short Supply.” The “Talent in Short Supply” spans 16 industries with a wide spectrum of work types and seniority. However, the annual taxable income subject to IIT of the applicants in Guangzhou must be more than RMB 300,000.
The following is a selection of professions or positions included in the list:
- Chartered financial analyst, certified public accountant
- Private banker, fund manager, insurance actuarial talents, risk management talents
- Senior management (e.g. chairman, vice chairman, general manager, deputy general manager, director, chief economist, chief accountant, etc.)
- Software engineer
- Construction (including planner, designer, engineer, etc.)
- Professional service (including person with legal professional qualifications, registered surveyors, tax agents, translators, etc.)
- Product manager or project manager in new generation information technology industry
- New energy/new material engineer
- Electrician
- Logistics manager in modern e-commerce
- Performing artist
- Specialist doctor
Subsidy application procedures
Once the eligible employees are identified, proper travel schedules should be maintained by the employees to ensure that they meet the specific thresholds for applying the IIT subsidy (eg. Guangzhou requires the IIT subsidy applicants to stay in the city for at least 90 days during a tax year).
If the individual taxpayer’s IIT is withheld by a withholding agent, it is preferable for the application for the IIT subsidy to be submitted by the agent. If not, the individual taxpayer would need to submit their application himself or herself. Whilst the process can vary among the nine Mainland GBA cities the following table illustrates the general application procedures:
- Application submitted to Human Resources and Social Security Bureau (HRSSB) and Science and Technology Bureau (STB).
- Assessment of “High-end Talent” by STB, and “Talent in Short Supply” by HRSSB.
- Examination of the application materials and approval of subsidy by Finance Bureau (assisted by STB, HRSSB and Taxation Bureau).
- Distribution of subsidy by Finance Bureau
The subsidy is exempt from PRC IIT, and is calculated and distributed once a year.
Claiming tax credit for Hong Kong salaries tax
For Hong Kong residents who hold Hong Kong employment and are required to work in other Mainland Greater Bay Area cities, the Hong Kong residents will be entitled to claim credit in respect of foreign tax payable on the income under Section 50 of the Inland Revenue Ordinance.
Please note that the Inland Revenue Department is authorized to issue additional assessments when the amount of relief from double taxation given to the Hong Kong residents become excessive.
Conclusion
To secure the IIT subsidy as a measure to attract or retain talents and to minimize their tax exposures and, it is important for both businesses and individuals to stay tuned for the policy updates and implementation details. CW CPA can assist you in both the updates and the application process.
Written by Rosanna Choi, Partner, CW CPA
