Regulations on Allowance of Utility Fee or Tax Payment for Foreign Employee

From Jan 1, 2009, allowance of utility fee or tax payment for foreign employee, except for those shall not be included in as taxable income of foreign professional based on The Scope of Application for Tax Preferences Provided to Foreign Professionals issued on Jan 8, 2008, must be in compliance with following regulations:

1. Allowance of utility fee, cleaning fee, telephone bill and consumables paid by an entity shall be regarded as subsidy for foreign employee. Such payment must be recorded as payroll expense and income tax shall be levied.

2. In case furniture purchased by an entity for foreign employee has been recorded in inventory list of the entity for depreciation, the expense shall not be included in payroll of employee and no income tax shall be levied.

3. Payment by an entity for income tax or other tax stipulated by Income Tax Act for a foreign employee shall not be recorded as expense or loss of the entity. Such payment is regarded as allowance offered by the entity and income tax of the foreign employee must be levied in accordance with Income Tax Act.

According to terms of The Scope of Application for Tax Preferences Provided to Foreign Professionals, travel allowance to qualified foreign employee and his/her family member, travel allowance for vacation after serving for certain period, relocation fee, utility fee, cleaning fee, telephone bill, rental, maintenance fee or education allowance to children can be recorded as expense of the entity instead of taxable income of the employee. Payment of an entity not in compliance with the scope of application shall be charged a tax at the same level as applied to local employee in accordance with Income Tax Act.