Tax Figures
Corporate Income Tax
25%
Income Tax Rate
- 0 – 1,500: 3%
- 1,501 – 4,500: 10%
- 4,501 – 9,000: 20%
- 9,001 – 35,000: 25%
- 35,001 – 55,000: 30%
- 55,001 – 80,000: 35%
- Over 80,000: 45%
Expats are able to offset their taxable income with relevant business expenses
Payroll Tax
N/A
Sales Tax
17%
Withholding Tax
10% for non-resident companies
Time to prepare and Pay Taxes
259 hours
Tax Returns Supplied
Yes
Employers Social Security and statutory contributions
China has 20% employers social security contribution which covers pension, health insurance, maternity insurance, work related injury insurance and unemployment insurance. This varies by region and generally has a limit to the employer contribution where the maximum social security contribution cannot exceed three times the average monthly wage.
e.g. in Shanghai in 2012 the maximum social insurance contribution was RMB 11689 per month because the average monthly wage was RMB 3896. Since 2011 expats are theoretically subject to employer and employee social security however many states are still yet to enforce this requirement.
Employees Social Security and statutory contributions
China has 8% employees contribution which covers pension, health insurance, maternity insurance, work related injury insurance and unemployment insurance. This varies by region.
Since 2011 expats are theoretically subject to employer and employee social security however many states are still yet to enforce this requirement.
Payroll
There are specific rules for payroll and taxation in China, depending upon whether your company employs foreign nationals or local Chinese employees. The primary concerns for a foreign company that needs to comply with tax laws in China include: Individual income tax (IIT) for employees in China, social security costs, payroll tax, sales tax, withholding tax, business tax and permanent establishment concerns.
China has some unique rules regarding employment, for example foreign nationals must pay local Tax and Health Insurance and also carry their own Health Insurance. Additionally employers of Chinese nationals must register and make contributions, which vary by region, to China’s social insurance system, known as the “Five Insurances,” plus a housing fund. The Five Insurances comprise a pension fund, medical insurance, industrial injury insurance, unemployment insurance and maternity insurance. For many companies using a local specialist payroll provider will simplify this process and ensure full compliance with local laws.
Remote Payroll
A remote payroll in China is where a foreign company, i.e. a nonresident company, payrolls a resident employee in China. This is not possible in China. Under Chinese law only Chinese entities are allowed to have employees based in China. This applies to both local and foreign employees. The only option for a non resident company to payroll its employees (local and foreign) in China is to use a fully outsourced service like a GEO or FESCO (Foreign Enterprise Service Company which will employ and payroll the staff on their behalf.
Local Payroll Administration
In some cases, a company will register their business in China under one of the forms available, (RO, WFOE or JV) but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider
Internal Payroll
Larger companies with a commitment to China may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for incountry human resources personnel who have the background needed to manage a Chinese payroll, and can fulfill all tax, withholding, and payroll requirements.
This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Chinese employment and tax laws.
Setting up payroll in China
Currency
CNY Chinese Yuan
Employee Information Required
The employment contract absolutely has to contain:
- Name, address & legal representative of the company
- Name, address, ID number of the employee
- Time limitation (if applicable) & probation period
- Remuneration
- Social insurance
- Description and location of the employment
- Regulations concerning working hour, rest & leaves
- Working conditions, including safety & protection measures
Documentation Required for New Employees
A written labor contract is absolutely necessary in China in order to protect both the employee and employer. The law has special regulations on what happens if a written contract is not provided within a month after starting work. If this is the case, the employer has to pay double the salary for every month the employee worked without a contract. Furthermore, if the employee works for 1 year or more without any written contract, the contract then becomes an open-ended one.
Payment Mode
Usually paid monthly. Can be paid by bank or cash.
Frequency of Salary Payment
12 monthly payments
Invoice / Payslips required
It is not very clear but there are sources that are implying that payslips are required.
Minimum Wage
As of 1 June 2014, the highest monthly minimum wage was in Shanghai (1,820 yuan), closely followed by Shenzhen (1,808 yuan). The lowest minimum wage was in the south-western province of Guizhou (1,030 yuan).
