Tax on foreign workers in force only in Beijing

PUBLISHED : Monday, 24 October, 2011, 12:00am
UPDATED : Monday, 24 October, 2011, 12:00am


The mainland's controversial new social security tax on foreign workers, which was supposed to take effect across the country on October 15, has come into force only in the capital. But even there, the deadline for registration is still unclear.

Provinces and cities across the country that have their own localised versions of tax regulations, such as Guangdong and Shanghai, are expected to roll out their versions of the law within a month, a person close to the situation said.

Under the tax, foreign nationals working on the mainland will pay up to 11 per cent of their salaries, to a maximum of 11,688 yuan (HK$14,190). Employers must also pay - up to 37 per cent of their foreign employees' salaries - to the same maximum of 11,688 yuan a month, according to the regulation published by the Ministry of Human Resources and Social Security.

The South China Morning Post previously reported that local governments were caught off guard by the new tax, complaining of having too little time to implement it.

In Guangdong, a spokesman for the provincial Department of Human Resources and Social Security said they would follow regulations and guidelines laid out by the central government. 'There will be no deviation when the regulation is carried out in Guangdong. The regulation [in Beijing] has only just gone into effect, but it does not set a deadline for businesses to register,' he said.

The province, he said, needs more time to gather the information required to launch the tax. Beijing's version of the law, which was made public on October 14, does not specify the deadline for registration and tax payment, the person said. 'It isn't very clear when the contribution should begin. We asked and they said the contribution would begin once the registration is completed,' he said. 'But they haven't made it clear whether the taxpayers have to make up the difference, say, if they miss this coming month's deadline.'

In Shanghai, a spokeswoman for the Municipal Human Resources and Social Security Bureau said they could not comment on the issue.

Central authorities may be taking a lenient approach to start with, and might step up enforcement as awareness of the law grows, the person close to the situation said. Registration requires hard copies of the taxpayers' personal documents, 'which take some time to produce', he said.

All Chinese nationals from Hong Kong, Macau and Taiwan are exempted from the new tax. Nearly 600,000 foreigners live on the mainland and 231,700 have work permits, according to the 2010 census.

The tax will be a burden to many firms and staff, and will give a clear cost advantage for Chinese staff over foreigners. Hongkonger Paul Wong Tai-long, who runs a textile trading firm in Dongguan with five foreign workers, said he might replace them with locals or Hongkongers, for whom he won't have to pay extra.

'It is a difficulty for many companies: 50,000 yuan a year for an expat worker is not a small amount of money, especially when I have several of them,' he said. Similarly, a consultancy firm in Xiamen, Fujian will likely lay off staff next year to offset rising costs, its human resources manager told China Daily.

Germany and South Korea have made deals with Beijing to exempt their nationals from the tax. At least 10 other countries, including the United States, Japan and Russia, are negotiating similar deals.