Payroll Compliance Updates- China

China

Improving and Adjusting Individual Income Tax Withholding for first-time salary earner

A. Update

In order to further support stable employment and ensure employment, and reduce the tax burden of the new recruits' personal income tax withholding, the following is an announcement1 regarding the improvement and adjustment of the personal income tax withholding for those who obtain wages and salary income for the first time in the middle of the year:

  • For a resident individual who obtains income from wages and salaries for the first time in a tax year, the withholding agent can calculate the cumulative standard deduction by multiplying 5000 Yuan per month by the number of months ending in the taxpayer's current year. This means that in the first month of employment of such first-time earners, cumulative standard deduction shall be granted starting from January till the month of tax withholding in a tax year.
    For example, for a fresh graduate who commences employment on July 01, 2020 and receives the first salary for July, the deduction for that month will be the standard monthly amount of CNY 5,000 plus the accumulated deductions of CNY 30,000 for 6 months, from January to June, prior to the commencement of the first employment, i.e. CNY 35,000 in total.
  • If a student receiving full-time academic education obtains labor remuneration for internship, the withholding agent should withhold personal income tax in the erstwhile cumulative manner, without giving effect to this announcement. In short, this announcement is not applicable to interns.
  • Employees who comply with the provisions of this announcement should promptly declare to the withholding agent/employer and truthfully provide the relevant supporting materials or undertakings. Such supporting materials or undertakings should be kept for future reference.
B. Statutory Compliance Release Date: July 28, 2020
C. Effective Date: July 01, 2020
 

Updates in Social Security Contribution details

A. Update

Updates in social security contribution for the several cities can be found.

B. Statutory Compliance Release Date: July 14, 2020
C. Effective Date: July 01, 2020
 

Extension of the implementation period of the enterprise social insurance premium reduction policyCovid-19

A. Update

The Ministry of Human Resource and Social Security has extended the period of exemption and reduction of employers' contributions for three social security insurances, i.e. employer's contribution to old-age pension insurance, unemployment insurance and work-related injury insurance, for all the provinces other than Hubei.

Under Public Notice [2020] No. 49 , the period of exemption of social security contributions for small and medium-sized enterprises will be extended to the end of December 2020 and the period of 50% reduction of social security contributions for large enterprises will be extended to the end of June 2020.

Also, many provinces can continue to implement the lower limit of the individual insurance payment base of 2019 as the lower limit in 2020. The upper limit of the individual insurance payment base will be adjusted normally according to the regulations.

B. Statutory Compliance Release Date: June 22, 2020
C. Effective Date: May 01, 2020 till December 31, 2020
 

Extension of exemption in Unemployment Insurance and Injury insurance contribution in Hubei ProvinceCovid-19

A. Update

For Hubei Province, 100% exemption for Unemployment Insurance and Injury insurance has got extended till April 2021.  Earlier, 100% exemption was granted to all the enterprises from February to June 2020 for Unemployment and Injury Insurance.

B. Statutory Compliance Release Date: May 12, 2020
C. Effective Date: July 01, 2020 till April 30, 2021
 

Reduction in Social Security Contributions due to Corona Virus' adverse effectsCovid-19

A. Update

At a meeting of the State Council, it was announced that the government had decided to exempt enterprises from, or reduce on their behalf, three social security contributions, namely:

  • Old-age pension insurance,
  • Unemployment insurance and
  • Work-related injury insurance.

These measures are intended to mitigate the adverse effects of the outbreak of Coronavirus.

This unified reduction and exemption policies for all regions will be implemented from February. Also, the social security premiums collected in February can be refunded or offset against future contributions.

The exemption to contribute to the all the social security contributions by employers are as under:

  • For Hubei Province, 100% exemption is granted to all the enterprises from February to June 2020 for Pension, Unemployment Insurance, and Injury. While for medical Insurance, 50% exemption is given to all the enterprises from Feb to June 2020 but such exemption does not include maternity insurance.
  • For Shanghai Province/City, Medical Insurance changes from 9.50% to 9% from February to December 2020, while Maternity Insurance rate remains at 1%.
  • For all other Provinces (other than Hubei and Shanghai): For Pension, Unemployment Insurance and Injury Insurance: 100% exemption is given to SMEs from February to June 2020 and 50% exemption is given to other enterprises from February to April 2020; For Medical Insurance: 50% exemption is given to all the enterprises from Feb. to June 2020 c. For Maternity Insurance: No change.

The above exemption shall be available from February 2020 to June 2020.

B. Statutory Compliance Release Date: February 18, 2020
C. Effective Date: February 1, 2020
 

Tax exemptions and deductions for preventing and controlling current novel coronavirus outbreakCovid-19

A. Update

In order to support the prevention and control of the current novel coronavirus (2019-nCoV) outbreak, the Ministry of Finance, General Administration of Customs and the State Taxation Administration have issued several circulars to grant tax exemptions.

The relevant circulars are as under:

  • Non-cash grants of medicine, medical products and preventive utensils provided by employers are not included in taxable income in computing individual income tax [Circular [2020] No. 109]
  • Donations by individuals, through non-profit social organizations or people's governments, in cash or in kind for fighting the 2019-nCoV are fully deductible in computing individual income tax [Circular [2020] No. 910]

Circular [2020] No. 9 and No. 10 apply from Jan. 01, 2020 to an undefined date.

B. Statutory Compliance Release Date: February 06, 2020
C. Effective Date: January 01, 2020
 

Rules on deduction of public welfare donations updated

A. Update

The Ministry of Finance and the State Administration of Taxation (SAT) issued a circular (Circular [2019] No. 99)2 updating the rules on the deduction of public welfare donations for individual income tax purposes. The main points are summarized below.

Deductible for income tax purposes

Payments made by individuals through designated non-profit organizations for public welfare purposes such as education and poverty alleviation are deductible in determining taxable income for individual income tax purposes.

Amount of donations

The amount of donations must be determined as follows:

  • In the case of monetary donations, the amount of donations will be the actual amount donated;
  • In the case of share equity or real estate, the amount of donations will be the original value of the property; and
  • In the case of non-monetary assets other than share equity and real estate, the amount of donations must be based on the market value of the assets concerned.
Deductible from various types of income

Public welfare donations made by individuals may be deducted from the comprehensive income (wages and salaries, with the exception of year-end bonuses etc.). However, the deductible amount is limited to 30% of the annual taxable comprehensive income. Subject to a 30% ceiling, non-resident individuals may equally deduct their donations made through public welfare organizations from their Chinese source income.

Reporting

Individuals claiming deductions are required to file a form detailing the donations together with their tax return (or withholding tax return filed by a withholding tax agent) and keep the receipts from public welfare organizations for a period of 5 years.

B. Statutory Compliance Release Date: December 30, 2019
C. Effective Date: January 01, 2019
A. Update

In order to further support stable employment and ensure employment, and reduce the tax burden of the new recruits' personal income tax withholding, the following is an announcement regarding the improvement and adjustment of the personal income tax withholding for those who obtain wages and salary income for the first time in the middle of the year:

  • For a resident individual who obtains income from wages and salaries for the first time in a tax year, the withholding agent can calculate the cumulative standard deduction by multiplying 5000 Yuan per month by the number of months ending in the taxpayer's current year. This means that in the first month of employment of such first-time earners, cumulative standard deduction shall be granted starting from January till the month of tax withholding in a tax year.
    For example, for a fresh graduate who commences employment on July 01, 2020 and receives the first salary for July, the deduction for that month will be the standard monthly amount of CNY 5,000 plus the accumulated deductions of CNY 30,000 for 6 months, from January to June, prior to the commencement of the first employment, i.e. CNY 35,000 in total.
  • If a student receiving full-time academic education obtains labor remuneration for internship, the withholding agent should withhold personal income tax in the erstwhile cumulative manner, without giving effect to this announcement. In short, this announcement is not applicable to interns.
  • Employees who comply with the provisions of this announcement should promptly declare to the withholding agent/employer and truthfully provide the relevant supporting materials or undertakings. Such supporting materials or undertakings should be kept for future reference.
B. Statutory Compliance Release Date: July 28, 2020
C. Effective Date: July 01, 2020
 
Source:
A. Update

Rates and wage limits for the 6 insurances and Housing Fund have been updated by the local Authorities for some of the cities.

B. Consolidated on: July 14, 2020
C. Effective Date: July 01, 2020
 
A. Update

For Hubei Province, 100% exemption for Unemployment Insurance and Injury insurance has got extended till April 2021. Earlier, 100% exemption was granted to all the enterprises from February to June 2020 for Unemployment and Injury Insurance.

B. Statutory Compliance Release Date: May 12, 2020
C. Effective Date: July 01, 2020 till April 30, 2021
 
Source:
A. Update

The Ministry of Human Resource and Social Security has extended the period of exemption and reduction of employers' contributions for three social security insurances, i.e. employer's contribution to old-age pension insurance, unemployment insurance and work-related injury insurance, for all the provinces other than Hubei.

Under Public Notice [2020] No. 49, the period of exemption of social security contributions for small and medium-sized enterprises will be extended to the end of December 2020 and the period of 50% reduction of social security contributions for large enterprises will be extended to the end of June 2020.

Also, many provinces can continue to implement the lower limit of the individual insurance payment base of 2019 as the lower limit in 2020. The upper limit of the individual insurance payment base will be adjusted normally according to the regulations.

B. Statutory Compliance Release Date: June 22, 2020
C. Effective Date: May 01, 2020 till December 31, 2020
 
Source:
A. Update

At a meeting of the State Council, it was announced that the government had decided to exempt enterprises from, or reduce on their behalf, three social security contributions, namely:

  • Old-age pension insurance,
  • Unemployment insurance and
  • Work-related injury insurance.

These measures are intended to mitigate the adverse effects of the outbreak of Coronavirus.

This unified reduction and exemption policies for all regions will be implemented from February. Also, the social security premiums collected in February can be refunded or offset against future contributions.

The exemption to contribute to the all the social security contributions by employers are as under:

  • For Hubei Province, 100% exemption is granted to all the enterprises from February to June 2020 for Pension, Unemployment Insurance, and Injury. While for medical Insurance, 50% exemption is given to all the enterprises from Feb to June 2020 but such exemption does not include maternity insurance.
  • For Shanghai Province/City, Medical Insurance changes from 9.50% to 9% from February to December 2020, while Maternity Insurance rate remains at 1%.
  • For all other Provinces (other than Hubei and Shanghai): For Pension, Unemployment Insurance and Injury Insurance: 100% exemption is given to SMEs from February to June 2020 and 50% exemption is given to other enterprises from February to April 2020; For Medical Insurance: 50% exemption is given to all the enterprises from Feb. to June 2020 c. For Maternity Insurance: No change.

The above exemption shall be available from February 2020 to June 2020.

B. Statutory Compliance Release Date: February 18, 2020
C. Effective Date: February 1, 2020
 
Source:
A. Update

In order to support the prevention and control of the current novel coronavirus (2019-nCoV) outbreak, the Ministry of Finance, General Administration of Customs and the State Taxation Administration have issued several circulars to grant tax exemptions.

The relevant circulars are as under:

  • Non-cash grants of medicine, medical products and preventive utensils provided by employers are not included in taxable income in computing individual income tax [Circular [2020] No. 10]
  • Donations by individuals, through non-profit social organizations or people's governments, in cash or in kind for fighting the 2019-nCoV are fully deductible in computing individual income tax [Circular [2020] No. 9]

Circular [2020] No. 9 and No. 10 apply from Jan. 01, 2020 to an undefined date.

B. Statutory Compliance Release Date: February 06, 2020
C. Effective Date: January 01, 2020
 
Source:
A. Update

The Ministry of Finance and the State Administration of Taxation (SAT) issued a circular (Circular [2019] No. 99) updating the rules on the deduction of public welfare donations for individual income tax purposes. The main points are summarized below.

Deductible for income tax purposes

Payments made by individuals through designated non-profit organizations for public welfare purposes such as education and poverty alleviation are deductible in determining taxable income for individual income tax purposes.

Amount of donations

The amount of donations must be determined as follows:

  • In the case of monetary donations, the amount of donations will be the actual amount donated;
  • In the case of share equity or real estate, the amount of donations will be the original value of the property; and
  • In the case of non-monetary assets other than share equity and real estate, the amount of donations must be based on the market value of the assets concerned.
Deductible from various types of income

Public welfare donations made by individuals may be deducted from the comprehensive income (wages and salaries, with the exception of year-end bonuses etc.). However, the deductible amount is limited to 30% of the annual taxable comprehensive income. Subject to a 30% ceiling, non-resident individuals may equally deduct their donations made through public welfare organizations from their Chinese source income.

Reporting

Individuals claiming deductions are required to file a form detailing the donations together with their tax return (or withholding tax return filed by a withholding tax agent) and keep the receipts from public welfare organizations for a period of 5 years.

B. Statutory Compliance Release Date: December 30, 2019
C. Effective Date: January 01, 2019
 

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