China Clarifies Individual Income Tax for Work-Related Injury Compensation
In order to fully implement the “Regulation on Work-Related Injury Insurances (Order of the State Council No.586, hereinafter referred as the ‘Regulation’),” the Chinese government issued the “Notice on Issues Regarding Individual Income Tax for Compensations of Work-Related Injury Insurances (caishui  No.40, hereinafter referred as the ‘Notice’)” on May 3, 2012 in accordance with the income tax exempt items in Article 4 of Individual Income Tax Law of the People’s Republic of China.
According to the Notice, the benefits and compensation distributed to injured employees and their close relatives through the work-related injury insurance system will be tax exempt. The benefits of the work-related injury insurance system covered under the Regulation include:
One-time compensation for disable grant-in-aid and disability allowance One-time medical allowance for work-related injuries One-time employment allowance for work-related injuries Work-related medical treatment; hospital meal allowance; transportation; room and board costs for going to an out-of-town hospital; rehabilitation cost for work-related injuries; cost for technical aids; and nursing costs Funeral subsidies, pension for dependants, and one-time compensation for work-related death