China’s income tax cuts ‘important stimulus’ in push to stabilise economic growth

The series of measures will reduce annual personal income tax by 110 billion yuan (US$17.3 billion), according to China’s State Council

Preferential taxes on year-end bonuses will stay in place until the end of 2023, while lower taxation on equity incentives will continue through next year

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China’s top leaders have made ensuring stability their top priority for next year, telling all regions and ministries to share responsibility in achieving that goal. Photo: Shutterstock

Published: 3:41pm, 30 Dec 2021

China will extend some personal income tax breaks, with certain measures to benefit high earners more, as the government seeks to encourage household spending as part of efforts to stimulate economic growth.

Preferential taxes on year-end bonuses will stay in place until the end of 2023, lower taxation on equity incentives will continue through next year and exemptions on some tax payments will be given to low income earners, according to a State Council statement released on Wednesday.

The measures will reduce annual personal income tax by 110 billion yuan (US$17.3 billion), the statement said.

For a high-end earner with a year-end extra payment of 500,000 yuan, the extended tax break on bonuses could help save around 77,000 yuan, according to a Bloomberg calculation.

The Chinese economy still needs policy support and tax cuts are an important stimulus

Jiao Ruijin

The announcement of the extended tax relief measures comes in the lead-up to the Lunar New Year, China’s busiest shopping season.

As Chinese policymakers look to reverse a slowdown caused by a worsening property slump, weak consumption and the coronavirus, the tax steps could boost decelerating retail sales growth.