- Shanghai adjusts employers’ social insurance contribution rates
- China allows pre-tax deductions for qualifying commercial health insurance products
China continues to attract foreign direct investments with its huge market and policies such as “Made in China 2025” and “One Belt, One Road” that promote manufacturing innovation and economic cooperation across Asia, Africa and Europe respectively. In 2016, the number of newly established foreign investment enterprises in China increased by 5% to 27,900, compared with the previous year.
But concerns, such as dealing with complex and frequently changing foreign investment and tax regulations, remain for foreign investors in China and those planning to enter this market.
SBA Stone Forest, our fully owned Chinese subsidiary, has launched a guide on doing business in China (2017 edition) that offers foreign investors insights on addressing such concerns. The publication is in line with its commitment as a one-stop corporate advisory and public accounting group to assist foreign investors in China and Chinese businesses venturing abroad.
‘A Handy Guide to Doing Business in China’ highlights local policy changes, their effects on businesses, and best practices. Key topics include:
- Incorporation of Business Entities
- Taxation and Accounting
- Human Resources
- Intellectual Property Rights
- Listing in China and Singapore
Download the guide
For more information, please contact ritaboyle@SBASF.com.
China recently announced new tax collection and administrative rules — in effect since 1 May 2017 — relating to its value added tax pilot programme.
Transactions of taxpayers who sell prefabricated houses, equipment and self-made steel structure products and provide construction / installation services are not considered as “mixed sales” — transactions that involve both sales of products and provision of services in general — during calculation of tax liability. Such taxpayers are instead required to calculate the sales volume of their products and services separately, as these are subject to different tax rates.
If a construction enterprise enters into a construction agreement with a contractor before authorising an intra-group entity (or “entity”) to provide the contractor with construction services (through internal authorisation or a tripartite agreement that allows the entity to directly issue the contractor VAT invoices and receive payments from it), the construction enterprise shall not be subject to VAT for the same transaction. The contractor shall claim relevant input VAT rebates based on special VAT invoices issued by actual suppliers of construction services.
A taxpayer providing plant conservation services shall be subject to VAT applying to “other lifestyle services”.
A taxpayer that derived income under the previous business tax regime prior to 1 May 2016 and has yet to issue invoices for such transactions is required to issue normal VAT invoices instead by 31 December 2017 (unless otherwise specified by the State Administration of Taxation).
Special and normal VAT invoices for sales of motor vehicles issued by general VAT taxpayers on or after 1 July 2017 must gain approval for tax deduction through the government’s VAT invoice enquiry website within 360 days from the issuance date. After that, the taxpayer has to claim input VAT credit by the filing deadline.
Certain items that previously required pre-approval before application to the State Administration for Industry & Commerce have to be approved after the application instead since June 2016, according to China’s State Council. These items include:
- Approval for incorporation of a pawnshop and its branch;
- Approval for incorporation of equity or cooperative joint ventures involved in printing;
- Approval for incorporation of wholly foreign-owned enterprises involved in packaging, decorating and printing;
- Approval for incorporation of enterprises involved in printing and publishing activities;
- Approval for incorporation of permanent agencies by foreign airlines in China; and
- Approval for manufacturing engines and propellers of civil aircraft
Shanghai has adjusted the social insurance contribution rates of local employers with effect from the start of this year. Their contribution to medical insurance was reduced to 9.5%. Separately, their contribution to unemployment insurance was lowered to 0.5% for the period of 1 January 2017 to 30 April 2018. Employers’ contributions for other types of social insurance after the adjustments are also shown in the table below. Local employees’ contribution rates remained unchanged.
Contribution rates after the adjustments:
|Employment injury insurance||0.2% – 1.9%||NA|
Employers in Shanghai that made social insurance contributions under the previous rates on or after 1 January 2017 would be refunded the excess amounts.
Shanghai Municipal Human Resources and Social Security Bureau has also adjusted the maximum and minimum monthly incomes for social security payments to RMB19,512 and RMB3,902 respectively since 1 April 2017.
Individuals who purchase qualifying commercial health insurance products are allowed pre-tax deductions of their expenses during calculation of taxable income, according to a joint notice by the Ministry of Finance, State Administration of Taxation and China Insurance Regulatory Commission. The amount of deduction is limited to RMB2,400 per year (or RMB200 per month).
The notice also states that when an employer purchases a qualifying health insurance product for its employees on a collective basis, this transaction may be shown in each individual’s remuneration record and the amount deducted for tax purposes must be within the limit mentioned earlier. Therefore, the product shall be deemed to have been purchased by individuals.
If the lowest tax rate of 3% is used in calculation, the taxpayer may save up to RMB6 (RMB200 * 3%) in tax liability each month, or RMB72 per annum. With the highest tax rate of 45%, the taxpayer may save up to RMB90 (RMB200 * 45%) each month, or RMB1,080 per annum.
Serving growing businesses since 1985, RSM in Singapore is the largest accounting, business advisory and solutions group outside the Big 4, with a total staff strength of over 950 in Singapore and 320 in China.
Our China Practice is dedicated to helping you venture into China smoothly and supporting you in navigating its complex regulatory and business environment.
Represented in Shanghai, Beijing, Suzhou, Shenzhen, Chengdu and Hangzhou by our wholly-owned subsidiary, SBA Stone Forest, we are a one-stop shop well positioned to support your expansion into China and subsequent operations there.
Chan Weng Keen, Partner & China Practice Leader
T +65 6594 7864
Ng Thiam Soon, Partner, China Practice
T +65 6594 7809
Tan Lee Lee (Ms), Director, China Practice
T +86 21 6186 7602
Yeo Lee Soon, Director, China Practice
T +86 10 8591 1900