Foreigners in China tend to overlook concerns related to taxes for as long as their employers can take care of it. However, every taxpayer should be aware of any opportunity to qualify for a tax exemption whenever possible.
Take a look at our previous article about Foreigners in China: How to Qualify for a Tax Exemption
Your housing rental, for example, is usually included in your salary which is therefore added to your taxable income. But do you know that there is a way to limit this rental tax and rather save it? Keep reading to find out how!
Housing fund vs. housing allowance
Although recently, China has included foreigners on the social insurance scheme, it is not compulsory and thus, foreigners seldom avail of it as it means giving a monthly contribution to the government. Instead, foreigners usually look for employers who can offer other benefits such as housing or food allowances. Particularly, the housing or rental allowance is a huge relief for foreign workers especially if they live in cities with expensive real estate housing such as Beijing or Shanghai.
If a foreigner opts for a housing fund contribution, he or she can enjoy housing rent deductions under China’s special itemized deductions covered by the new IIT law.
For more information, check out our previous post on Housing Rent Deductions for Taxpayers in China
On the other hand, a foreigner can take advantage of a housing allowance paid by his or her employer. However, he or she must guarantee the submission of a “rental fapiao” for tax declaration purposes. A rental fapiao is important to get a reimbursement from your employer as housing allowance paid by cash is subjected to IIT.
Oftentimes, employers provide the housing allowance to their foreign employees along with the salary package or they expense it monthly. Based on the real rental fapiao, the amount of housing rent should better be under 30 percent of the total salary.