China Pushes Tax Subsidy to Lure Top Overseas Talent to Greater Bay Area
South China’s Guangdong province plans to set aside 3.1 billion yuan ($450.1 million) this year for tax subsidies targeted at overseas professionals working in the Greater Bay Area, in a bid to lure talent from neighboring Hong Kong and Macao.
The provincial government made the 2020 budget proposal on Tuesday, earmarking the funds for tax subsidies for outstanding professionals from outside the Chinese mainland. The subsidies will only be available to professionals who meet certain criteria and work in any of the nine mainland cities in the Greater Bay Area. The purpose of the subsidies is to narrow the gap in income tax rates between the mainland and relatively cheaper Hong Kong.
The budget proposal came after the Ministry of Finance and the State Taxation Administration together instructed the provincial government in March to make up the difference between the income tax rates of mainland cities and those of Hong Kong, according to a notice (link in Chinese) released at the time. The policy affects income taxes levied from January 2019 to December 2023.
The incentive underlines China’s ambition to turn the Greater Bay Area, a mega city cluster consisting of nine southern mainland cities, Hong Kong and Macao, into a technology hub and finance powerhouse with advanced manufacturing and a modern services industry.
Hong Kong’s standard salary tax rate is 15%, and progressive tax rates vary from 2% to 17% based on how much money a person makes each year. As such, the Guangdong government specified that professionals who meet certain criteria and whose incomes are taxed at a rate above 15% can receive a subsidy so they don’t end up paying more than 15% tax on what they earn, according to a notice (link in Chinese) published in June.
The tax subsidies are available to those working in Guangdong’s cities of Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing. Subsidy recipients need to be residents of Hong Kong, Macao, Taiwan or other areas outside the mainland, and meet certain criteria set by city governments to be considered outstanding talent, according to the June notice.
The subsidy policy is aimed at high-earning professionals in order to attract more international talent to the Greater Bay Area, said Wu Xueming, a chairman of a Greater Bay Area youth association.
Wu said that as of June, governments had given away tax subsidies worth over 235 million yuan to professionals in Shenzhen’s Qianhai district and the island of Hengqin in Zhuhai, both of which are key testing grounds for economic reform. Nearly 80% of the people who applied for the subsidies were from Hong Kong, he said.
In February 2019, the State Council, China’s cabinet, unveiled a detailed roadmap for the bay area’s development. The area accounts for 5% of China’s population, but generates more than 11% of its gross domestic product, or 10.87 trillion yuan in 2018, greater than that of South Korea, according to Caixin’s calculations based on official data.
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