China Taxation Analysis of Preferential Policies for Shenzhen Enterprises during the Epidemic

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February 23, 2020

China Taxation
Analysis of Preferential Policies for Shenzhen Enterprises during the Epidemic
Updated to February 2020

Since the outbreak of the “Novel Coronavirus Pneumonia” (hereinafter referred to as NCP) in China, the central and local governments have issued a series of policies aimed at easing the difficulties and burdens of enterprises. For the preferential policies generally enjoyed by small and medium-sized enterprises in Shenzhen, Kaizen sorted out the important contents that enterprises should pay attention to and deal with promptly in the near future and hereby listed below for your reference.

I. Reduction or Exemption of Property Rent

Non-state-owned enterprises, scientific research institutions, medical institutions and individual industrial and commercial households that lease the properties (including factory buildings, innovation industrial buildings, office buildings, agricultural products wholesale markets, commercial shops, storage and logistics facilities and supporting service buildings) owned by municipal and district governments and district-owned, stated-owned enterprises shall be exempted from rent for 2 months..

Kaizen Suggests that eligible enterprises should make inquires to their property owners or apply for rent exemption. Kaizen could provide assistance for such application, please contact us if you need our professional assistance.

II. Deferred Payment of Social Insurance

1. Application Method

According to the newest regulation of Human Resources and Social Security Bureau, the enterprises that cannot pay the social insurance on time due to the epidemic (including individual industrial and commercial households), shall report to social security department, and apply for deferred payment of social insurance and pay the social insurance within 3 months after the epidemic is resolved without any surcharge for late payment.
II. Deferred Payment of Social Insurance –Cont’d

2. Application Time

a. If the report is made on or before 26th February 2020, the deferred payment period is from February to the month that the epidemic is resolved; if the report is made from 26th to 29th February, the deferred payment period is from March to the month the month that the epidemic is resolved.

b. If the report is made on 26th of every month from 1st March to the month that the epidemic is resolved, the deferred payment period is from the current reporting month to the month that the epidemic is resolved; if the report is made after 26th of every month, the deferred payment period is from next month to the month that the epidemic is resolved.

Kaizen Reminder

1. Provided that an enterprise completes the application for deferred payment of social insurance, it will not affect the use of medical insurance card and other rights and interests of the insured employees. However, the enterprise cannot apply for maternity allowance during this period and can continue to apply after the enterprises paying social insurance in full.

2. According to the relevant notification obligation stipulated in the social security law, the enterprises shall inform the employees about the social insurance declaration and payment during the epidemic.

Kaizen Suggestions

1. The enterprises can choose the deferred payment period according to their actual situation. If the enterprises want to apply for deferred payment, they shall pay attention to the above application time to avoid the impact.

Important reminder: the enterprises that intend to apply for deferred payment from February 2020, must arrange it as soon as possible as the application deadline is 26th February 2020. Please inform us in time if you need our assistance.

2. In order to avoid possible disputes of labor relationship, the enterprises shall inform the employees of relevant situations of social insurance payment timely during the deferred payment period. Kaizen can provide the professional consultation and assistance, please contact us if you need our professional assistance.
III. Reduction and Exemption of Social Insurance on a Phased Base

In accordance with the “Notice of Reduction and Exemption of Social Insurance for Enterprises on a Phased Base” (no. 11 [2020]) issued by the Human Resources and Social Security Bureau, the Ministry of Finance and the State Administration of Taxation on 20th February 2020, the social insurance shall be reduced and exempted on a phased base from February 2020 as follows:

Province Enterprise Type Period Reduction & Exemption Method
Hubei All Enterprises February to June The company part of pension insurance, unemployment insurance and employment injury insurance Reduction and Exemption
Other Provinces Small, Micro and Medium-sized Enterprises February to June Reduction and Exemption
Large Enterprises February to April Reduction by half

Kaizen Reminder

1. Social insurance, including pension insurance, medical insurance, unemployment insurance, employment injury insurance and maternity insurance, in which maternity insurance and employment injury insurance are fully borne and paid by employers, the pension insurance, medical insurance and unemployment insurance are jointly borne and paid by employers and employees. However,

2. In accordance with the foregoing policy, the exempted social insurance is limited to the employer’s contribution part, and is limited to the pension insurance, unemployment insurance and employment injury insurance. That is,

3. The employer’s part of medical insurance and maternity insurance are not exempted and still need to be paid. And,

4. The employee’s part of pension insurance, medical insurance and unemployment pension are not exempted and still need to be paid. Employees’ social insurance benefits should not and will not be affected. That is,

5. The employer shall still fulfill their obligation to withhold and pay employees’ contribution according to the law when calculating and paying employees’ salaries.

III. Reduction and Exemption of Social Insurance on a Phased Base –Cont’d

 

Kaizen Suggestions

1. According to the newest information, the related department require to suspend the application and payment of social insurance in February (i.e., pension insurance, unemployment insurance, employment injury insurance). For the enterprises that have paid social insurance in February, the social insurance will be refunded according to related regulations.

Kaizen will continue to pay attention to the newest policies and regulations, but the enterprises shall determine whether apply for deferred payment of social insurance first before the detailed implementation details are published, in order to avoid the application of refund and to stabilize the cash flow.

2. For the identification criteria of large enterprises, small, medium and micro enterprises, please contact Kaizen professionals or visit our website for the “Identification Criteria of Large, Medium and Micro Enterprises in China”.

IV. The Deferred Payment and The Reduction of Contribution Proportion of Housing Provident Fund

For the enterprises that are affected by the epidemic, and have difficulties in paying the housing provident fund, after approval by the employees’ congress or trade union, the enterprises before the end of the year 2020, shall:

1. Apply for deferred payment of housing provident fund for a period not exceeding 12 months. Or,

2. Apply for reducing the housing provident fund contribution proportion to 3% at the minimum and not exceeding 12 months.

Kaizen Reminder

1. As the detailed implementation rules have not been published yet, the impact of delaying the payment on the use of the housing provident fund by employees cannot be predicted for the time being. Kaizen will continue to pay attention to the newest policies and the further impact.

2. Enterprises can only apply for one of the policies for deferred payment and reduction of the contribution proportion of housing provident fund. And,

3. The application for deferred payment or reduction of the contribution proportion of housing provident fund should be approved by the enterprise employees congress or the trade union.

IV. The Deferred Payment and The Reduction of Contribution Proportion of Housing Provident Fund –Cont’d

Kaizen Suggestions

1. The enterprises shall make timely choices on whether to apply for deferred payment or reduction of the contribution proportion of housing provident fund before the end of the year 2020 according to the actual situations and changes.

2. For the small and micro enterprises without employees’ congress or trade union, the specific requirements of the application need to be further verified with the Human Resources and Social Security Bureau. Kaizen will continue to pay attention to the newest information. Please contact us for professional assistance.

 

V. Exemption of Basic Electricity Charge

Shenzhen Power Grid Bureau issued the “Notice on the Implementation of financial Funds to Pay the Basic Electricity Charges of Shenzhen Industrial and Commercial Enterprises for February 2020”, Shenzhen industrial and commercial enterprises which satisfy the requirements can apply for basic electricity charges exemption for February 2020. For details, please follow our WeChat official accounts “启源会计师事务所”, or visit our website for the “Regulations of Exemption of February’s Basic Electricity Charges for Shenzhen Enterprises”.

Annex: Reference Policies and Regulations

1. Supporting Measures for Enterprises Taken by Shenzhen Government to Over the Difficulties Caused by Novel Coronavirus Pneumonia.
2. Notice of Reduction and Exemption of Social Insurance for Enterprises on a Phased Base
3. Guidance of Reduction of Medical Insurance on a Phased Base
4. Notice on the Deferred Payment of Enterprises Social Insurance and Related Treatments of Medical Insurance during the Epidemic.

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