Are foreign individuals employed in China eligible for tax deductions?

Foreign individuals employed in China are eligible to a standard deduction of RMB 4,800. On top of this, there are a number of allowances that may be deducted off an individual’s income, including the mandatory Chinese social security payments for foreigners. Note: at the time of writing in December 2014, not all Chinese cities have implemented social security for foreigners yet. 

The Chinese Tax Bureau allows foreign staff to deduct certain “allowances” before calculating the tax burden on their monthly salary. This is something that should be discussed between an employee and employer as part of the discussion of an overall salary package. These include:

• Allowances for housing, meals, relocation and laundry expenses 
• Relocation expenses upon commencement or cessation of employment in China 
• Reasonable business travel expenses and two personal trips to the individual’s country of origin 
• Reasonable allowances for language training and children’s education

The tax authorities will only permit these allowances to be deducted if they are included in the employee’s contract. The employee needs to produce an official fapiao (receipt) every month for the expenses, in addition to meeting other conditions.