Two more cities join Beijing in tax on foreigners

PUBLISHED : Monday, 09 January, 2012, 12:00am
UPDATED : Monday, 09 January, 2012, 12:00am


Three months after the mainland was supposed to begin levying a new tax on foreign employees, two more cities are preparing to adopt the controversial measure, joining Beijing to make a total of three cities to do so.

For the past two weeks Tianjin and Suzhou have been registering foreigners who work there, in preparation to start charging the long-delayed social security tax on non-Chinese employees, according to a person close to the situation.

The law was supposed to take effect nationwide on October 15, but Beijing was the only city that began registering foreigners working there on that date. The South China Morning Post reported that local governments were caught off guard by the new tax, complaining of having too little time to implement it. But even in Beijing the implementation has been chaotic, the person said.

In Chaoyang district, for instance, the local government issued a memorandum at the end of 2011 informing residents the law had to be implemented by January 20 'because few businesses have responded to the law'.

That followed the government's attempt to set a deadline of December 31, which was abandoned 'to give more time for companies to take action', the person said.

Cities have been told that contributions must date back to October 15, and that those who are late will have to pay a penalty of 0.05 per cent per day in interest - 18 per cent a year.

'So far three cities have begun [complying with the tax],' the person said. 'But other cities, like Shanghai, Dalian , Guangzhou, and Shenzhen, haven't done anything yet.'

The central government acknowledged in October local authorities were not ready to implement the tax, but insisted there was no going back.

Under the law, foreign workers and their employers have to make monthly contributions to a basket of social security funds. Firms say the law is vague and lacks detail and will add an extra burden to doing business on the mainland.

'Many companies are still looking at each other, waiting for others to be the first to pay because nobody wants to be the first, when it comes to paying the government this tax,' he said. Some multinational companies and chambers of commerce have begun negotiations with Beijing, hoping to win better deals, he said.

IBM China is understood to be one of the big companies negotiating with the Social Security Bureau.

The 'Big Four' accountancy firms are also taking a wait-and-see approach.

An executive of one of the firms said: 'The tax is a huge burden to many companies, and it makes sense that nobody is eager to pay, since even the government is not implementing it very rigorously.'

Foreigners will pay up to 11 per cent of their monthly salary, and employers will pay up to 37 per cent of their employees' salaries, on earnings up to 11,688 yuan (HK$14,286).


The number of foreigners working on the mainland who are liable under the new tax