IIT & Payroll
Effectively managing local human resources (HR) is an important part for every organization around the world. Chinese law requires all companies to keep certain files on their employees, to follow strict procedures on where to register them and sets out clear rules on monthly reporting and declaration of social security obligations as well as individual income tax. This task becomes increasingly difficult when managing personnel and payroll of expatriates whom work across borders and whom would become subject to various rules and regulations different from their home country. To manage this effectively, in-depth understanding of various HR compliance issues and requirements is required on an international basis as well as from a local perspective.
The reality is that for foreign companies, China’s tax law on treatment of local and foreign staff is very different. As a result, we have seen that many foreign companies have been facing difficulties to manage their HR administration and ensuring compliance in their organization.
Individual Income Tax
In China, since 2019, individual income tax is withheld based on the cumulative withholding method. This would basically mean that an individual with a significant salary and increase of salary, could have a different amount of IIT that needs to be paid monthly. The foreign company is required to withhold the individual income tax on behalf of the employee on a monthly basis.
In 2019, the country's ongoing regulatory changes included major overhauls of the Individual Income Tax system, including for example:
- Introduction of Itemized Deductions
- End of Expatriate Allowances - by 2022
- Developments regarding the Annual Bonus Policy
This would make it more challenging to calculate the taxes monthly and might require companies to hire a professional third party to support with the personal tax obligations.
Social Security & Housing Fund
Companies in China are required to withhold on a monthly basis (i.e. employee and employer's contribution) on behalf of all their employees the social security.
The Social Security includes five branches:
- Employment injury
Additional to the Social Security, each employee is required to pay monthly into a national fund for personal real estate purchase called Housing Fund.
Our IIT & Payroll Services
Managing personnel in China requires knowledge of local regulations and taxes. We offer administrative relief with IIT solutions for local and expatriate staff of your subsidiary in China.
Services offered include:
- Monthly Payroll Calculation
- Social Security & Housing Fund Registration
- Monthly & Annual Tax Declaration
- Expat Salary Cost Reimbursements
- Individual Tax & Benefits Planning