Circular of State Administration of Taxation(SAT) Concerning

　　Individual Income Tax Law of People's Republic of China >and its implementing regulations and < Circular of Ministry of Finance （MOF） and SAT Concerning Several Issues on Individual Income Tax Policies >（CaiShuiZi [1994] No.20） has laid down the scope of IIT exemption on relevant allowances given to foreign individuals， now we have the following clarifications on the detailed definitions and administrative guidelines for implementing the above regulations：
　　I Any reasonable housing， meal and laundry allowances given to foreign individuals either in non-cash form or in the form of actual reimbursements shall not be subject to IIT. When the taxpayer first receives such allowances or when the quantum or form of payment have changed， the taxpayer must provide the valid vouchers to the tax authorities when declaring the IIT in the month following the month of such change， and the tax exemption will be subject to approval②by the governing tax authorities……
　　II Where the foreign individuals take up employment or resign from China， such relocation payments in the form of reimbursements shall not be subject to IIT， and the tax payer must provide valid vouchers， which shall be subject to the confirmation and approval②by the governing tax authorities， and only reasonable amounts can be granted the tax exemption. The establishments or places set up by foreign investment enterprises and foreign enterprises within the territory of China， may pay certain allowances to employees in the guise of relocation expenses monthly or periodically， such allowances would be subject to IIT in the item of wages and salaries.
　　III Any reasonable allowances for business trips within and outside China received by foreign individuals shall not be subject to IIT. The taxpayers must provide valid vouchers （copies） of transportation expenses and accommodation expenses or relevant business trip plans arranged by enterprises to the tax authorities， and such exemption shall be subject to confirmation and approval②by the governing tax authorities.
　　IV Home leave allowance received by foreign individuals shall not be subject to IIT. The taxpayers should provide the valid vouchers （copies） of the transportation on home leave， which shall be reviewed by the governing tax authorities②。 Any reasonable actual expenses incurred on home leave， where the annual frequency of such home leave is reasonable and the payment criteria①meet the regulations， shall be exempted from IIT.
　　V Language training fees and child education fee allowances received by foreign individuals shall not be subject to IIT. The taxpayers should submit payment vouchers to the relevant authorities to substantiate that such trainings and educations have taken place， and such information would be reviewed by the governing tax authorities②， and only reasonable amounts shall be exempted from IIT.
　　（**notes：
　　①on 14th May 2001， SAT （Guoshuihan [2001] 336） has set guidelines regulating "the frequency of annual home leave and the payment criteria" ：
　　I The home leave expenses which are exempted from IIT， are only restricted to the expenses incurred by foreign individuals' trip tickets from their work locations in China to their original homes place （including the place where their spouses or parents lived ） and this is further restricted to twice a year.
　　II This circular shall be implemented from the promulgation date. The home leave expenses which are incurred before the promulgation date of this circular and which have not been declared， shall still follow the current circular.
　　②According to 19th May 2004 State Council （Guofa [2004] 16）， SAT has cancelled the approval procedures for IIT exemption on housing allowances， meal allowances， laundry expenses， relocation allowances， business trip allowances， home leave allowance， language training fees， and child education fees received by foreign individuals. Meantime please refer to 25th June 2004 SAT （Guoshuifa [2004] 80）。