A circular issued by the State Administration of Taxation on 1 February 2019 states that a taxpayer who received an annual compensation exceeding RMB120,000 in 2018 is not required to file the 2018 individual income tax (IIT) return, unless he or she falls into one of the following situations:
- The taxpayer derives wages and salary income from two or more sources in 2018; or
- The taxpayer has other individual incomes that were not declared during the monthly filings in 2018.
A taxpayer who is in either situation above is required to file the 2018 IIT return before 30 June 2019.
China retained some preferential tax policies during the grace period for taxpayers to fully comply with the amended Individual Income Tax Law, which took effect on 1 January 2019 and ends on 31 December 2021. Caishui  No. 164 (or Circular 164) jointly released by the Ministry of Finance and State Administration of Taxation explains how these policies are implemented as follows:
1. Annual bonus
The annual bonus will be excluded from comprehensive income when calculating Individual Income Tax (IIT) until the last day of the grace period.
During the period from 1 January 2019 to 31 December 2021, IIT liability for the annual bonus is calculated separately. The annual bonus amount divided by 12 will determine the applicable tax rate and quick deduction for the annual bonus.
2. Tax exemption allowances for expatriates
During the period from 1 January 2019 to 31 December 2021, expatriates may choose to enjoy either special additional tax deductions or tax exemption allowances, such as housing allowances, language training fees and children’s education fees. However, the preferential tax policy cannot be changed for one tax year once chosen.
With effect from 1 January 2022, expatriates will no longer enjoy tax exemption allowances and may only choose to enjoy special additional tax deductions.
Tax deductible items will be the same for expatriates in China and Chinese citizens under the amended IIT law from 1 January 2022. The method of calculating IIT liability for annual bonus only applies to resident individuals and needs clarification for non-resident individuals.
The State Council issued a circular on 53 measures to support reform and innovation in the pilot free trade zones.
Among these is the abolishment of the requirement for at least 25% of foreign technical personnel to possess a relevant Chinese industrial certificate in a foreign-invested construction engineering design enterprise.
When such an enterprise undertakes a Sino-foreign joint construction project in a pilot free trade zone, it is not subject to the usual requirement for having at least 50% foreign investment in such projects.
In addition, foreign entities with less than three years of employment agency experience can now directly invest in Chinese employment agencies without being subject to the usual requirement for at least 25% foreign investment in such agencies.
The government is expected to introduce more measures to encourage foreign investment in sectors not on the negative list within the pilot free trade zones.
Under Chinese labour law, employers are required to pay employees thrice their normal daily wage for work on official public holidays. The rate is twice the normal daily wage for work on rest days in the holiday period. For work on adjusted working days, the normal daily wage applies. Adjusted working days in China are Saturdays or Sundays designated as official working days to compensate for public holiday dates that fall on weekends.
The table below shows the list of official public holidays, their dates and adjusted working days released by the State Council for 2019.
|Public Holiday||Date(s)||Date(s) to which Thrice Normal Daily Wage Applies||Date(s) to which Twice Normal Daily Wage Applies||Adjusted Working Day(s)|
|New Year||30 Dec 2018–
1 Jan 2019
|1 Jan 2019||30–31 Dec 2018||29 Dec 2018|
|Spring Festival||4–10 Feb 2019||5–7 Feb 2019||4 Feb 2019 &
8–10 Feb 2019
|2–3 Feb 2019|
|Tomb Sweeping Day||5–7 Apr 2019||5 Apr 2019||6–7 Apr 2019||–|
|Labour Day||1 May 2019||1 May 2019||–||–|
|Dragon Boat Festival||7–9 Jun 2019||7 Jun 2019||8–9 Jun 2019||–|
|Mid-Autumn Festival||13 –15 Sep 2019||13 Sep 2019||14–15 Sep 2019||–|
|National Day||1–7 Oct 2019||1–3 Oct 2019||4–7 Oct 2019||29 Sep 2019 &
12 Oct 2019
Starting from 1 January 2019, companies that face serious financial difficulties but are expected to recover within one year will be eligible for reimbursement of 50% of their unemployment insurance expenses incurred in the previous year if they endeavour to stabilise their workforce and minimise layoffs, Premier Li Keqiang said at a State Council meeting.
Since the start of this year, the eligible group for internship subsidies has been expanded from college graduates to also include unemployed young people aged 16 to 24.
The current policy of reducing the unemployment insurance contribution rate from 3% to 1% will continue beyond its previous expiry date on 1 April 2019. No new expiry date has been announced so far.
In response to the central government’s call, Guangdong announced plans to invest RMB20 billion (about US$2.98 billion) to support local entrepreneurship and employment. The province also plans to lower healthcare insurance premiums by more than 1.5% and reduce work-related injury insurance premiums by 30% by 31 December 2019. It also extended the subsidy period for new graduates’ social insurance to two years for eligible small firms. These measures are expected to lower social insurance costs for firms in Guangdong by more than RMB10 billion (US$1.5 billion).
China’s enterprise salary guideline is the basis for negotiation of salaries between enterprises and employees and an important indicator of salary increases in companies.
The enterprise salary guideline suggests a maximum, minimum and recommended salary increase percentage. Except for Shanghai and some provinces such as Liaoning, most locations in China saw increases in all three of these enterprise salary guideline components compared with 2017.
In 2018, the average recommended enterprise salary increase for 22 locations across China was over 7%.
The highest recommended enterprise salary increase in 2018 was in Central China’s Henan province at 12%, followed by both the capital, Beijing, and North China’s Shanxi province at 8.5%.
Details of the recommended enterprise salary increases for the 22 locations are shown in the table below.
Recommended Enterprise Salary Increases for 22 Locations
|Location||Recommended salary increase in 2018 (%)||Recommended salary increase in 2017 (%)||Change compared with 2017 (%)|
RSM is the seventh largest audit, tax and consulting network globally. In Singapore, we are the largest outside the Big 4, serving internationally active businesses.
We focus on growing businesses, helping them to improve profits, enhance business value and internationalise.
We provide audit, tax, corporate and risk advisory, as well as business support services.
Our China Practice is dedicated to helping you venture into China smoothly and supporting you in navigating its complex regulatory and business environment.
Chan Weng Keen, Partner & Co-head, China Practice
T +65 6594 7864
Ng Thiam Soon, Partner & Co-head, China Practice
T +65 6594 7809
Tan Lee Lee, Director, China Practice
T +86 21 6186 7602
Yeo Lee Soon, Director, China Practice
T +86 10 8591 1900