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China’s IIT Childcare Deductions

In 2021 China unveiled the Three-Child Policy to increase the birth rate, maximize the role of the population in driving social and economic growth, and reduce the long-term demographic imbalances. Moreover, measures were announced to support couples to have children and ease the tax and financial burden (primarily educational and housing costs) of raising them. On 5 March 2022, the Government Work Report discussed during the National People’s Congress suggested that the expenses for the care of infants and young children under the age of 3 shall be included among the special additional deductions for individual income tax purposes.

The State Council subsequently issued on 19 March 2022 the Circular Guofa [2022] no. 8 on “Establishing Special Additional Deductions for Individual Income Tax for the Care of Infants and Young Children Under 3 Years of Age”, followed by the Announcement of the State Administration of Taxation [2022] No. 7 “on Amending and Promulgating the Operational Measures for Special Additional Deductions for Individual Income Tax (Trial Implementation)”.

According to Circular Guofa no. 8, individual taxpayers can deduct, when computing their individual income tax, the expenses related to the care of infants and children under the age of 3 at a fixed rate of RMB 1,000 per month for each child or infant, from the month of birth to the month before the child turns 3 years old .

The deduction can be enjoyed 100% by one of the parents, or both parents can deduct 50% each. Taxpayers can require employers to include the deduction at the monthly withholding of the individual income tax or during the annual settlement.

The special additional deduction related to expenses for caring for infants and children, which is applicable from 1 January 2022, is the latest deduction for individual taxpayers after the six types of special additional deductions introduced at the end of 2018 (Circular Guofa [2018] no. 41).

The special additional deductions, that were implemented starting from the tax year 2019, include deductions for expenses related to children’s education, continuing education, medical treatment for critical illness, interest on the loan for house purchasing (or the rental), and elderly support.


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