Viewpoints from Kaizen

Shenzhen Social Insurance Contribution Rates Effective from 1 February 2014 Type of Social Insurance Scope of Application Contributions Rate Payment Base (02/01/2014-06/30/2014)  Total  Employer Employee Lower Limit Upper Limit Standard 1 Pension Insurance Basic Pension Insurance + Local Supplementary Pension Insurance Shenzhen Residence 22% 14% 8% 1,80814,754 1,808 It is based on the gross monthly salary. It cannot be higher than 300% of last year’s average salary of Shenzhen employees. But it also cannot be less than the minimum monthly wages of Shenzhen employees. Basic Pension Insurance Non-Shenzhen Residence 21% 13% 8% 14,754 1,808 2 Medical Insurance  First Grade Basic Medical Insurance All Employees 8.7% 6% 2% 14,754 2,951 It is based on the monthly total salary but cannot be higher than 300% of last year’s average salary of Shenzhen employees, also cannot be less than 60% of last year’s average salary of Shenzhen employees. Local Supplementary Medical Insurance 0.2% […]

Enterprises are encouraged to invest more in R&D. The total R&D expenditures of hi-tech enterprises can be included in their costs. If the expenditures accrue by 10% (including 10%) than the previous year, and they are in compliance with the country’s tax laws and regulations, then an additional 50% of the expenditures is, upon the approval by the taxation authority, allowed to be deducted from the taxable sum of the year. *(Note 5) If a non-governmental technological enterprise has been put into operation for over 2 years with integrated management system, and a yearly payment of tax of over RMB200,000 Yuan, its employees in compliance with the related regulations of the SEZ can apply for permanent residence in the city. The number will be determined by the sum of the paid tax. *(Note 8) National treatment will be given to foreign-invested enterprises and foreign employees; for foreign-invested enterprises to produce […]

1. Sales Threshold of Business Tax From April 1st, 2003 (the taxable period), the rules of sales threshold of Business Tax for individual taxpayers in Shenzhen have been made the following adjustment: (1) For tax payment on a monthly basis, the threshold for leasing private property is 1000 yuan of its monthly turnover, for other business operation the threshold is 1000 yuan of its monthly turnover. (2) For tax payment at each time (or day), the threshold is 100 yuan of its turnover each time (or day). The taxpayer whose sales turnover does not reach the threshold as above-mentioned rules shall be exempt from Business Tax. 2. Reduction and Exemption of Business Tax The following items may be exempt from Business Tax: (1) Nursing Services provided by nurseries, kindergartens, home for the aged, welfare institution for the handicapped, matchmaking and funeral services; (2) Services provided by the disabled on individual […]

On 16 November 2011, the Chinese Ministry of Finance (MOF) and the State Administration of Taxation (SAT) jointly issued Caishui [2011] No. 110 (Circular 110) and Caishui [2011] No. 111 (Circular 111) which set out the details of the Shanghai VAT pilot arrangements (VAT Pilot rules). Circular 110 contains the general framework of the VAT pilot while Circular 111 details the implementation rules that are specifically applicable to Shanghai. Circular 110, Notice for the Introduction of the Pilot Scheme to Convert Business Tax to VAT, outlines the general principles for the overall VAT reform pilot program in China (although no date for the full reform pilot program is mentioned). The Circular clarifies that the VAT reform pilot program will be carried out in two phases:  Phase 1: The initial pilot applicable to specific sectors in Shanghai; and  Phase 2: Roll out of the pilot to other regions, or […]

Characteristics of a WFOE Wholly Foreign Owned Enterprise (WFOE), also known as Wholly Owned Foreign Enterprise (WOFE), is a limited liability company, the establishment of which is governed both by the Company Law of PRC and Law of the PRC on Enterprises Operating Exclusively with Foreign Capital. A WFOE can engage itself in approved business activities and issue tax invoices on its own. It is a corporation and a tax resident. All shareholders of WFOE should not be Chinese nationals. Name of a WFOE The name of the WFOE is governed by “Regulations on the Management of name of Enterprises”. Since WFOE is a limited liability company, its name should be in the form of “Name of City + Name of the Enterprise +Industry+ Company Limited “. Accordingly, a company registered in Shanghai will normally bear a name like: US Corp Software Development (Shanghai) Limited. There are certain restrictions on […]

Introduction Shanghai is the financial hub of China. It is estimated that over 30% of commercial activities in China go through Shanghai and its adjacent areas. At the end of year 2005, over half of the Fortune 500 firms had set up their presences in Shanghai, either in the form of Permanent Representative Office (RO), Wholly Foreign Owned Enterprises (WFOE, also known as Wholly Owned Foreign Enterprises) or Equity Joint Ventures (EJV). With more than 200 years’ history for the financial industry, Shanghai was the biggest financial center in China and Far East’s major commercial center in 1920s and 1930s. Since 1990s, Shanghai has regained much of its vitality and is gradually emerging as a financial center for the region once again. Location Surrounded by the Yangtze River in the north, the East China Sea in the east, the Hangzhou Gulf in the south and Jiangsu and Zhejiang provinces in […]

Expatriates on extended business trips to China If you are sent by your organization to China and your salary is paid off-shore (probably in your home country) and you spend more than 183 days in China in a calendar year, than you have to pay IIT in China based on the days you effectively spend in the country. This means that if you spend in China, let’s say, 184 days within a calendar year, than you would have to pay taxes on all income sourced from China (meaning income related to your work performed in China). Foreigners working for legal enterprises in China Without going into too many complicated calculations and theories, if you hold positions such as the Chief Representative (CR) of a Representative Office (RO) or the General Manager of a Chinese Limited Company, Wholly Foreign Owned Enterprise or a Joint Venture anywhere in China, then you are […]

Introduction to China Wholly Foreign Owned Enterprise (WFOE) The Wholly Foreign Owned Enterprise (WFOE) in general refers to a Limited liability company wholly owned by one of more foreign investor(s). Company limited by shares, if all shares are held by foreign nationals, then it is alos referred to as WFOE. In China, WFOEs were originally conceived for encouraged manufacturing activities that were either export orientated or introduced advanced technology. However, with China’s entry into the WTO, these conditions were gradually abolished and the WFOE is increasingly being used for service providers such as a variety of consulting and management services, software development and trading as well. The registered capital of a Wholly Foreign Owned Enterprise (WFOE) should be subscribed and contributed solely by foreign investor(s). A WFOE does not include branches established in China by foreign enterprises and other foreign economic organizations. The Chinese Laws on WFOE do not have […]

A technology type Wholly Foreign Owned Enterprise (WFOE) refers to limited liability company registered in China by foreign individuals or corporations and that the company is to be engaged in the business of the research and development of information technology, electronics, biological engineering, new materials, new energy and other high and new technology. 1. Procedures for Establishing a WFOE in Beijing China 1.1 Preliminary (a) Lease of Office Space Firstly, the investor will have to enter into a tenancy agreement in relation to the office space to be used by the WFOE for a term of not less than 12 months. The office must be located in a commercial building. (b) Legalization of Identity Documents of Shareholder/Member The investor is also required to arrange to have the identity documents of the shareholder legalized by the Chinese Embassy or Consulate in the country where the shareholder is registered/resided. (c) Other Documentation […]

1. Features of Permanent Representative Offices 1.1 Legal Status of a Permanent Representative Office The Permanent Representative Office (also known as Resident Representative Office) is a non-legal entity operating representing its parent company foreign companies registered outside China, including those registered in Hong Kong, Macau and Taiwan). A Permanent representative office is not allowed to engage itself in business activities, issue invoices on its own, remitting outward, signing sales or purchase contracts, or receiving income from services performed but may act as a liaison and promotion office for its parent company. 1.2 Name of a Permanent Representative Office The name of the Permanent Representative Office should be in the form of ¡§Name of the Foreign Enterprise + Beijing + Representative Office (or Office)¡¨. For example, USA New York LLC Beijing Representative Office. 1.3 Business Address (Registered Office) Before submitting the documents for application for registration to the Beijing Administration for […]