On June 2023, China made adjustments to its social insurance bases. These changes aim to ensure fair and sustainable social security systems that benefit both employees and employers. The adjustments are part of the ongoing efforts by the Chinese government to enhance social welfare and promote economic stability.
Back in August of 2021, the exemption from social insurance for expatriates in Shanghai expired. After that, no additional extension notices have been introduced so far. In this case, all individuals regardless of nationality should be subjected to the payment of social contribution in accordance with the Social Insurance Law of PRC. This is the reason why many expatriates are gradually starting to pay attention to paying social insurance and keep focusing on related news. For related regulations, please move to our previous sharing: www.serviceonnewgrounds.com
The social security system in China is made up of five different kinds of insurance plus a mandatory housing fund. The five insurances are pension, medical, unemployment, work-related injury, and maternity insurance. Employers and employees must contribute to these forms of social insurance on a monthly basis. It is important to note that different cities have different contribution rates and bases for social insurance and housing funds, and such policies are updated yearly by each city. For example, the contribution rates and caps applicable in Shanghai up-to-date are as follows:
| Social Insurances |
Employer portion |
Employee portion |
| Pension |
16% |
8% |
| Medical (including maternity) |
10% |
2% |
| Unemployment |
0.5% |
0.5% |
| Work-related injury |
0.16%~1.52% |
n/a |
| Housing Fund |
Employer portion |
Employee portion |
| Mandatory housing fund (Chinese only) |
5%~7% |
5%~7% |
| Additional housing fund (Chinese only) |
1%~5% |
1%~5% |
- What is the calculation base of social contribution?
The social insurance calculation base in Shanghai is determined by the local authorities based on certain regulations and it is subject to adjustment each year by the local authorities. The base is usually set at a certain percentage of the average wage of employees in the previous year of the city. The exact percentage may vary depending on the specific social insurance scheme. The previous year’s average salary is reported by each individual or company and data is collected until the end of June. Therefore, the base adjustments generally occur in July of each year.
As far as individual employees are concerned, the general practical base falls into two categories:
- Employees that worked for less than one year in the previous year or joined in the current year;
- Employees that worked for a whole year in the previous year;
The former is generally calculated on the basis of gross salary at the time of onboarding; while the latter is calculated on the basis of their average income of the previous year. This base, once submitted, will not be changed instantly due to any gross salary adjustments made during the year.
The base for the second year of employment is often increased for employees who worked for a whole year in the previous year because the calculation of the average salary is required to include all of the employee’s wages for the previous year, i.e., in addition to base salary, additional bonuses, overtime salary, etc., and these amounts should be pre-taxed and should occur in the full previous year.
- What are the upper and lower limits of the social contribution base for 2023?
According to the national requirements, each province, autonomous region, and municipality directly under the Central Government should approve the upper and lower limits of the social contribution base each year.
The average salary of employees in urban units of the city is CNY 12,183/month. Based on this calculation with the lower limit set at 60% of the average salary and the upper limit set at 300%, from 1 July 2023 to 30 June 2024, the upper/lower limit of the city’s social contribution bases will be adjusted to:
- Upper (Maximum) Base: CNY 36,549/month
- Lower (Minimum) Base: CNY 7,310/month
With the calculation base and percentage of rates, the company or employee can easily calculate the monthly social insurance contribution that should be paid.
The employee’s personal social insurance costs should be excluded from his or her gross salary; and companies often need social insurance data when calculating their company costs, because the monthly cost of employment is the employee’s gross salary plus the amount of social insurance borne by the company.
Soon after the new data is generated this month, you will know the latest employee and company data. Making a good budget is already a crucial forward-looking part of your company. In addition, whether or not there will be a preferential tax rate for year-end bonuses in 2024 is an issue that is being closely watched by everyone. This will also greatly affect employee income and company costs.
Should you have further questions, please feel free to contact us.
(Continued from the previous article)
- Provision on bona fide acquisition of false special invoices
«Circular of the State Administration of Taxation on the Settlement for the Taxpayers Obtaining the False Special Invoice of Value-added Tax without Acknowledgement» defines what is “bona fide”.
It is stated in the Circular that the purchaser shall be deemed to have obtained the false special invoice in good faith if all the following conditions are met:
- a genuine transaction between the purchaser and the seller;
- the sale is made using the special invoices of the province (autonomous region, municipality directly under the Central Government, and cities listed in the plan) in which the purchaser is located;
- all the contents of the special invoices match with the actual ones, such as the name of the seller, the seal, the number of goods, the amount, and the tax amount; and
- no evidence that the purchaser knows that the special invoices provided by the seller were obtained by illegal means.
On the other hand, tax authorities of the purchaser’s location shall grant credit for input tax or export tax refund in accordance with the law, if:
- the purchaser is able to obtain again from the seller a legal and valid special invoice issued by the anti-counterfeit tax-control system; and
- the purchaser has obtained the certificate that the tax authorities in the place where the seller is located have conducted or are conducting an investigation and punishment on the seller’s false special invoices accordingly.
However, if the above conditions cannot be met, the input tax deducted or the export tax refund obtained by the purchasing party shall be recovered accordingly.
In addition, if the taxpayer has obtained in good faith a false special invoice that has been recovered and deducted in accordance with the law, then the taxpayer does not need to consider the provisions of Article 32 of the «Tax Collection Administration Law of the People’s Republic of China»: – If the taxpayer fails to pay the tax in accordance with the prescribed period, and the withholding agent fails to settle the tax in accordance with the prescribed period, the tax authorities shall, in addition to ordering the payment within the prescribed period, impose a late payment fee of five percent of the tax due on a daily basis. If the taxpayer fails to pay the tax in accordance with the prescribed period, the taxation authority shall, in addition to ordering the payment within the prescribed period, impose a late payment fee of five ten thousandths of the late payment of tax on a daily basis from the date of the late payment of tax. In other words, tax authorities will not add the late payment fee arising from the recovery of past taxes.
- Necessary documentation in case the tax inspection happens
Through the above layer-by-layer analysis, accountants of enterprises need to prepare the necessary financial documents to respond to tax inspection, while supporting themselves if they are bona fide purchasers, including but not limited to: –
- the original special invoice was identified as a false invoice
- purchase and sale contracts/business contracts or other contracts involving the invoice
- the goods involved in the incoming order, outgoing order, transfer orders, or transport documents
- relevant accounting documents
- bank payment voucher
- VAT declaration report for the month in which VAT is deducted, and CIT annual return
- statement of the entire business transaction and tax declaration
To sum up, enterprises do not need to be too panicky after receiving the Notice of Tax Inspection. Prepare the above list of supporting materials first and conduct self-inspection after communicating with the relevant tax officer to understand the situation. Companies that have evidence to prove they are bona fide invoice purchasers should actively respond to the tax authorities’ inspection and cooperate with the follow-up investigation. The enterprise will usually pass the tax inspection successfully if they respect all the conditions mentioned previously.
If you have any questions, please feel free to contact us.
References:
«Circular of the State Administration of Taxation on the Settlement for the Taxpayers Obtaining the False Special Invoice of Value-added Tax without Acknowledgement»
http://www.chinatax.gov.cn/chinatax/n359/c448/content.html
China is now fully open! In order to better coordinate the epidemic prevention and control as well as the needs of economic and social development, and to facilitate the people-to-people exchange between China and foreign countries, the National Immigration Administration of PRC has decided to adjust the visa and entry policy starting as of Beijing time at 00:00 on March 15, 2023.
- Valid visas issued before 28 March 2020 by the Chinese visa authorities abroad will resume functioning.
- Foreigners may apply for all types of visas, including tourism and medical treatment.
- Port visas shall resume being issued in line with the relevant laws and regulations.
- The visa-exemption policy for Hainan, visa-exemption cruise policy for Shanghai, visa-exemption policy for foreigners to visit Guangdong from Hong Kong and Macao, and visa-exemption policy for ASEAN tour groups to Guilin, Guangxi shall resume operation.
In recent times, the immigration policies of many countries are updated in real-time. In addition to the reopening policy, other restrictions are listed below for your consideration.
Chinese embassies in many countries notice: From 15 March, antigen testing instead of nucleic acid testing.
According to the latest requirements of the Chinese government regarding the optimization of pre-trip testing measures for people traveling to China, starting from 15 March 2023, passengers flying directly from specific countries[1] to China are allowed to replace nucleic acid testing with antigen testing (including self-testing with kits). In order to facilitate the pre-trip preparation of travelers, the embassies concerned have issued guidelines on epidemic prevention and control.
- Distal testing: Nucleic acid testing within 48 hours before boarding or self-testing with antigen kits, negative results before going to China, positive results please go to China after turning negative.
- Customs declaration: After obtaining a negative test result, fill out the “Health Declaration Card of the People’s Republic of China” through the WeChat app “Customs Passenger Service” (“海关旅客指尖服务”), the Customs APP or the web version to make declaration.
- Airlines are not required to check pre-boarding nucleic acid test certificates and antigen test results.
- In-flight epidemic prevention: Please insist on wearing a mask during the flight and do your personal protection to reduce the risk of infection.
- Entry quarantine: Upon arrival at the port, complete the necessary customs clearance procedures with the customs health declaration code. Customs will test a sample of people with abnormal health declarations or fever and other symptoms in accordance with a certain percentage.
- passengers with positive test results, in accordance with the requirements of the notification letter, go home/living place for isolation, or medical treatment;
- passengers with negative test results, by the Customs and Excise Department in accordance with the “Frontier Health and Quarantine Law of PRC” and other laws and regulations to implement routine quarantine;
- passengers with normal health declarations and tests can pass the entrance.
- Territorial epidemic prevention and control: Passengers should strictly comply with the requirements of territorial epidemic prevention and control after entering the country.
Policies vary from country to country, so it is recommended that you pay attention to the latest Chinese embassy and consulate notices in real-time before making travel arrangements, read them carefully, and follow them to avoid affecting your trip.
Should you have any further questions, please feel free to contact us.
Reference:
Further Adjustment of Visa and Entry Policy for Foreigners to China
Authority: National Immigration Administration
Date: 2023-03-14
https://www.nia.gov.cn/n897453/c1566449/content.html
Notice on Further Adjustment of Visa and Entry Policy for Foreigners to China
Authority: Embassy of the People’s Republic of China in the United States of America
Date: 2023-3-13
http://us.china-embassy.gov.cn/chn/lsfw/zj/qz/202303/t20230314_11040138.htm
[1] Currently, the following countries have issued this notice: France, Italy, Denmark, Spain, Georgia, Tanzania, Nepal, Mongolia, Vietnam, Iran, Greece, Brunei, Thailand, New Zealand, Malaysia, etc.
