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China Imposes Statutory Social Insurance on Expatriates


Previously, expatriate employees working in China did not need to pay social insurance under the China statutory social insurance system, but this will be changed from 1 July 2011. There will be a new PRC law that come into force requesting expatriate employees to do make the monthly social insurance contribution, in the same way local Chinese employees have done for the past years. Taxand China reviews the statutory social insurance to be imposed on expatriates.

It is a clear instruction that the expatriate employees who work in China will have to start paying social insurance from the month of July 2011. However, please note that expatriate employees include both of the following situations:

  1. employees employed by the Chinese companies
  2. employees employed by foreign companies but are sent to China to work under dispatch / secondment arrangements.

Although the relevant implementation rules are still under draft by PRC authorities, it is obvious that, legally speaking, companies in China who have expatriate employees now have a new compliance to follow. Companies will find their monthly cost of employing expatriates will increase, because not only the employee himself / herself will need to pay the employee part, but also companies will need to pay the employer contribution in the same time.

After contribution, expatriates in China will enjoy the same rights and obligations as a Chinese citizen under the current PRC statutory social insurance system, which includes access to a pension fund, maternity insurance fund, unemployment insurance fund and other funds from different locations and from different industries. Several uncertain areas in this new policy do exist, such as:

  • how will the expatriate withdraw or repatriate the pension fund when they leave China
  • what is the tax bureau's view on calculating individual income tax when the pension fund (which has until now been deductible from their monthly PRC individual income tax) becomes available to expatriates.

Taxand's Take

As this is a new law, we believe that the relevant supplementary rules, regulations and further explanations will be available afterwards. We recommend businesses update management teams on this new compliance and are prudent in following up with local authorities and consultants.

Your Taxand contact for further queries is:
Kevin Wang
T. +86 21 6447 7878

Taxand's Take Author