Li Shijia, an accountant, thought his company might have broken the law by using stocks to attract top talent.
"As employer, giving stock options instead of cash saves costs and is a good incentive for the employee, " said Li, "but that poses legal questions in China as how the stock is taxed."
Stock exchange generates tax, however, China has no specific terms as how stocks given to employees should be taxed and Li's company calculates it by applying the rules for stocks exchanged with intellectual property.
"We were worried that if the method is judged illegal, we would receive a large penalty," said Li, whoes company is located on the island of Hengqin in Zhuhai, south China's Guangdong pilot free trade zone (FTZ).
Li's concern was addressed in April, as Hengqin launched a tax reporting system which encourages companies to voluntarily disclose tax information, and if need be, they can make up for the shortfall without receiving penalties.
This means Li's company can disclose how the given stock is taxed first, and if tax rules for giving stock change in the future, they can still adjust the tax accordingly, instead of being fined for evading taxes.
"The policy have greatly reduced our risk," Li said.
The tax reporting system is just one example of how the Guangdong FTZ has been creating an environment for companies to better incentivize talent, especially those with degrees from abroad.
On Thursday, China issued a plan to further reform FTZs across the country, giving them greater autonomy in reform and opening-up.
He Changhong, 58, is a witness of the FTZ program to introduce talent from overseas.
An expert working in Canada in the field of remote sensing, he
decided in July, 2017 to set up his second company in the Guangzhou FTZ.
"The government promised two million yuan (around 313,000 U.S. dollars) within six months for starting the company," said He, "and we received the funds in just three months."
Besides the startup funding, FTZs also offer talented people like him rent-free office space for three years, salaries paid directly by dollars for overseas experts, and the return of tax differences for talented people from Hong Kong and Macao.
"China is paying more attention to drawing talent," he said, "Overseas professionals can enjoy good startup support, and promising career development."
The Guangdong FTZ is also reducing the threshold for setting up companies to stir innovation.
Setting up an enterprise takes only three days, close to the level in Singapore and Hong Kong.
He Changhong now intends to further expand his company. "We are introducing a group of experts to the company this year, and we considering moving to a bigger office," he said.
"In the future, the Guangdong FTZ will further reform and opening-up to get greater breakthroughs," said Zheng Jianrong, head of the bureau of commerce in Guangdong.
