- Clarification on super deduction of research and development expenses
- Public welfare donations deductible from corporate income tax
Unemployment insurance rates in China would be progressively lowered, according to a recent announcement by the Ministry of Human Resources and Social Security and Ministry of Finance. The announcement stated that since 1 Jan 2017, provinces with a total unemployment insurance rate of 1.5% may lower it to 1%. The collective and individual rates of unemployment insurance have been unified respectively for all locations within autonomous regions and municipalities, and the individual rates cannot exceed the collective rates. Unemployment insurance rates are expected to be lowered nationwide by 30 Apr 2018.
Rates of unemployment insurance, work-related injury insurance and maternity insurance have been decreased in various parts of China since 2015. In 2016, the Ministry of Human Resources and Social Security and Ministry of Finance also reduced the pension insurance premium rate from 20% to 19% nationwide. These have enabled enterprises to save over RMB120 billion in costs during the year.
With China’s economic growth expected to slow further, these moves seek to promote employment stability as well as sustainable and healthy development of the economy.
The State Administration of Taxation ("SAT") issued an internal notice to tax bureaus on 23 January 2017 to clarify issues on super deduction of research and development expenses and changes to corporate income tax (CIT) filing requirements from 2016.
SAT referred to its earlier notice, which stated that a super deduction form (Appendix 6) should be submitted together with the annual CIT return.
Separately, the R&D expense form (Appendix 5) shall be completed at the year end and submitted to the tax authority along with the annual financial statements.
Taxpayers should note these changes and fully comply with the SAT’s requirements when applying for super deduction of research and development expenses in their CIT return for 2016.
A revision to Article 9 of China’s Corporate Income Tax (CIT) Law has been in effect since 24 February 2017. Article 9 now states that public welfare donations made by an enterprise are deductible from CIT with a cap at 12% of its annual profit. Any excess amounts may be carried forward for the next three years for the purpose of CIT deduction. The revision is especially favourable for enterprises that make large one-off public welfare donations.
China’s General Rules of Civil Law will take effect from 1 October 2017 and comprise 11 chapters and 206 articles, which state the fundamental rules and basic principles of civil law, as well as civil rights and liabilities.
There are also specific provisions on the protection of personal information, general provisions on intellectual property rights, and other provisions on the protection of data and online virtual properties.
While the General Principles of Civil Law are still valid for the time being, the General Rules of Civil Law shall prevail in the event of any discrepancy between the two laws.
A pilot programme for merging maternity insurance with employees’ basic medical insurance will be conducted in Handan, Hebei province, and 11 other cities, the General Office of the State Council said.
According to the Ministry of Human Resources and Social Security, the merger only relates to administrative integration and there are no changes to the respective benefits of both insurance types. This means that employees who also purchased maternity insurance would still be eligible for its benefits.
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