The circular quoted above can also be interpreted so, that only item (3) is subject to interpretation and approval by local tax authorities - Items (1) and (2) are not.

Geezer: Firstly, there isn't always employer in China who would act as tax collector.

Secondly, everyone who earns over 120 000 RMB a year, is required to file separate annual tax return, and it is in this process where additional income such as allowances can be filed. If those allowances are filed with monthly income, I don't know how to process.

Below I will copy summary which I compiled from Chinese government's official English translations, regarding "housing allowance" part of the tax-free allowances,, for another discussion elsewhere.

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Roughly speaking, China's legal and regulatory system breaks down to Laws, Regulations, and Circulars. Laws form the high level framework, Regulations detail implementations, and Circulars clarify individual points of concern.

Legal framework for subject of "housing allowance" comes from _Individual Income Tax Law of the People's Republic of China_(english.mofcom.gov.cn/[...] which states following:

"For the taxpayer who have no domicile in China but derive wages and salaries from sources within China, or have domicile in China but derive wages and salaries from sources outside China, the additional deduction for expenses shall be allowed on the basis of the average income level, living standard and the changes of exchange rates. the scope of application and amount of the additional deduction for expenses shall be regulated by the State Council."

Those regulations mentioned in the law are: _Regulations for the Implementation of the Individual Income Tax Law of the People's Republic of China_ (www.chinatax.gov.cn/2013/n2925/n2956/c310063/content.html).

These regulations describe in more detail, what constitutes "income from wages and salaries":

"Article 8 The scope of the categories of individual income tax provided in Article 2 of the Tax Law:

1. "Income from wages and salaries" refers to income from wages, salaries, awards, year-end bonuses, bonus from labor service, _allowances_ and subsidies and other income related to appointments or employment,"

Thus, default nature of _all _allowances is that tax will be levied on them.

The regulations also clarify which persons are eligible for possible tax-free employment benefits:

"Article 27 The applicable scope of additional tax reductions for expenses as provided in paragraph three of Article 6 of the Tax Law refers to:
1. Foreign nationals working in enterprise with foreign investments and foreign enterprises in China,
2. Foreign experts employed by enterprises, undertakings, social organizations and government institutions in China,
3. Individuals with residence in China but having jobs or being employed drawing wages or salaries outside China,
4. Other individuals defined by the Ministry of Finance."

Further clarifications to these regulations are published in form of circulars, one of which is _Circular on Some Policy Questions Concerning Individual Income Tax_ (www.chinatax.gov.cn/2013/n2925/n2956/c310099/content.html, although my quote below is from another source with slightly different translation).

It states:

"The incomes listed below are exempt from individual income tax for the time being:

(1) Housing subsidies, food allowances, moving fees and laundry fees gained by individual [u]foreigners[/u] in the non-cash form or in the form of being reimbursed for what they spend.

(2) Traveling allowances at home and abroad gained by individual foreigners in accordance with rational standards.

(3) The visiting relatives expense, language training expense and children education expense gained by individual foreigners, that part considered to be reasonable through examination and approval by local tax authorities.
"

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Personally I fall in this category:

" Individuals with residence in China but having jobs or being employed drawing wages or salaries outside China"

Which makes me eligible to these tax-free allowances. Since I have no local employer, I must file (and study) everything myself - which I by the way do annually with the same process that everyone earning over 120 000 must do even if their taxes would get filed monthly by employer.

Still, employers (local or abroad) cannot pay lump sump allowances without it being considered fully taxable - everything must be paid against fapiaos or other documents based on real expenses.

Tigertiger: As it says _visiting_ relatives, I am quire sure that it means the "left behind" family which did NOT move to China with you, and their subsequent visits to come see you in Chiina on temporary basis.

Relocation costs (for the entire household), as well as some other expenses are covered under different items in the policy.

I only quoted item number 3 here, and am only interested in the definition for "visiting relatives expense".

Geezer: These are items which can be paid by employer to the employee, and employee can deduct these expenses from taxable income, IF the specific items are mentioned in work contract and there are relevant fapiaos.

And if you are eligible for these tax-free allowances to begin with, which depends on a few factors (which are clear to me).

China's regulations about tax exempt allowances for eligible foreigners include this:

"(3) The visiting relatives expense, language training expense and children education expense gained by individual foreigners, that part considered to be reasonable through examination and approval by local tax authorities."

Would anyone have experience about the "visiting relatives expense" in Kunming, as these items are subject to approval by local tax authorities rather than on national level.

Firstly, are there some limitations to what constitutes "relatives" - only spouse, or also parents, siblings, grand children, nieces and nephews...?

Secondly, is this limited to local expenses such as food and accommodation, or does it also include flights/other transports from/to home country and/or within China?

Any first-hand knowledge or even hearsay would be welcome.

www.china.org.cn/english/LivinginChina/204171.htm

"According to the Administrative Rules of the People's Republic of China on Cross-Border Transportation of National Currency issued by China's central bank in December 2004, travelers are allowed to take up to US$5,000 equivalent of foreign currency and 20,000 yuan of local currency (US$1=7.7 yuan) into or out of the country.

There is no need to declare this to customs if the currency you carry is less than the limit. "