Hong Kong’s neighbour to the north, Shenzhen seeks to maintain its edge in innovation. And in an attempt to spur innovation in the city, will lower salary tax to 15 percent from the current 45 percent.
With these tax breaks, the government is trying to attract top talent from Hong Kong and Macau and boost innovation and entrepreneurship among the youth in the region.
“Suppose you earn a million yuan [US$144,894] 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," shared Wang Lixin, Deputy Mayor.
Shenzhen aspires to become a global centre of innovation. The innovation it seeks to drive will come from the right talent and hence the latest taxation scheme is nothing but an attempt to lure such top talent.
However, Shenzhen is yet to decide how will it define top talent.
Wang said that Shenzhen government would soon release specific standards to define top talent. He further added that city’s most urgent need was professionals in electronics and telecommunications.
While Beijing has already okayed tax breaks for overseas talent in the “Greater Bay Area”, in a guideline issued by the ministry of finance on 14th March, local governments still have to come out with their own specific rules.
As we wait for the rules to draw out, it will be interesting to see how the government defines top talent. The standards or competencies listed by Shenzhen might be useful for other countries as well.
Further, if Shenzhen is able to attract top talent from overseas with new tax scheme, more economies might come up with similar strategies.