The large enterprise division of China's State Administration of Taxation (SAT) has issued tax circular Qi Bian Han [2009] No. 33 ("Circular 33) to provide guidance on staff-related expenses, according to KPMG China.

According to KPMG China, the circular, which will have an effective burden on corporate income taxes (CIT) and individual income taxes (IIT) covers the following items:

1. Petrol expenses for private cars.

-CIT: Expenses made before 2008 will be deductible as salaries; while expenses made from 2008 will be deductible as staff welfare expenses and subject to limit.

-IIT: Taxable on transportation allowances net of business expenses local government standard. If there is no standard, 30% of allowances shall be taxable.

2. Communication allowances of staff

-CIT: Not covered by Circular 33

-IIT: Taxable on communication allowances net of business expenses per local government standard. If there is no standard, 20% of allowances shall be taxable

3. Personal accident issuance for staff

-CIT: Deductible only if insurance is related to special job types or other commercial insurance specified by MOF/SAT

-IIT: Taxable