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Hong Kong’s immediate neighbour to the north, Shenzhen, is set to slash salary tax from 45% to 15% to maintain its tech edge and encourage innovation.
According to Shenzhen deputy mayor Wang Lixin, the city will use its own operating income to make up for the shortfall in tax revenue. Under the scheme, annual income tax will be cut to 15% for certain individuals.
The initiative takes place amid a backdrop of turbulent international trade relations between the US and China.
“Suppose you earn a million yuan (US$144,600) a year. Under the new rules, you will need to pay 150,000 yuan as income tax, which saves you about 300,000 yuan at the current level,” Wang explained at an innovation summit in Shenzhen on 26 May.
“The key now is how to define top talent,” Wang added, saying the city’s most urgent need was for professionals in electronics and telecommunications.
“In short, all the sectors where China sees itself being contained by the US, technology wise. We need to fill all the links in the supply chain. Then we are truly competitive in the world, and can truly have the power of say,” he said.
The Beijing administration has already approved tax breaks for overseas talent in the so-called Greater Bay Area, in a guideline issued by the ministry of finance in March. However, local governments still have to put in place their own specific rules.
The tax breaks are intended to attract top talent from Hong Kong and Macau and boost innovation and entrepreneurship among the youth in this area, it was reported in the SCMP.