OUR INSIGHTS
• China extends preferential tax treatment for employees’ educational expenditures to all enterprises
TAX
• China lowers value added tax for taxable sales and imported goods
CORPORATE ADVISORY
• New regulations for foreign-invested non-banking payment institutions
HUMAN RESOURCES
• Suzhou increases high-temperature allowance for employees
• Chinese cities announce local citizens’ average salaries in 2017
OUR INSIGHTS
China extends preferential tax treatment for employees’ educational expenditures to all enterprises
China’s State Administration of Taxation released a circular on the pre-tax deduction policy for employee educational funds of enterprises (Cai Shui [2018] No.51 – Circular 51) that took effect on 1 January 2018.
Circular 51 introduced new preferential tax treatment in line with the Chinese government’s efforts to support innovation and development of SMEs.
It states that expenditures of employees’ educational funds incurred by an enterprise are tax deductible, subject to a maximum amount of 8% of the total remuneration paid to the staff during the year of assessment. The portion of expenditure on employee education in excess of the aforementioned 8% can be carried forward to succeeding years of assessment.
Circular 51 allows other types of companies to enjoy preferential tax treatment in this area that only high-tech companies were eligible for in the past. It also encourages all enterprises to invest in staff education, with the aim of achieving a win-win situation for employers and employees.
TAX
China lowers value added tax for taxable sales and imported goods
China has reduced the value added tax (VAT) rate for taxable sales or imported goods with effect from 1 May 2018, according to Cai Shui [2018] No. 32 (Circular 32) issued by the Ministry of Finance (“MOF”). The VAT rate for taxable sales and imported goods is lowered from 17% to 16% and 11% to 10% respectively.
MOF issued another circular, Cai Shui [2018] No. 33 (Circular 33), which unifies the criteria for small-scale VAT payers and took effect from 1 May 2018 as well.
Circular 33 states that the threshold of a small-scale taxpayer’s annual taxable sales amount shall be up to RMB5 million. An individual or entity that has registered itself as a general VAT payer may also switch its status to that of a small-scale VAT payer by 31 December 2018, and its verified input VAT that has not been offset yet shall be transferred out.
With Circulars 32 and 33 in force, businesses that plan to sign new sales and purchase agreements should confirm the new tax rate for the price to avoid tax disputes in the future. The agreement should also clearly state whether VAT is included in the price or separately charged.
CORPORATE ADVISOR
New regulations for foreign-invested non-banking payment institutions
Foreign-invested non-banking payment institutions have to comply with new regulations (Announcement [2018] No.7) announced by the People’s Bank of China (PBC) with effect from 19 March 2018.
Announcement [2018] No.7 states that any overseas institution intending to offer electronic payment services to any subject within the territory of China for domestic or cross-border transactions is required to establish a foreign-invested enterprise in the country. The overseas institution also has to obtain a payment business licence in addition to the general business licence in accordance with the conditions and procedures stated in the Administrative Measures for Payment Services of Non-financial Institutions.
It must have an independent payment system and a disaster recovery system within China. All personal and financial information collected and generated by the payment system shall be stored, processed and analysed within the country as well. The overseas institution’s corporate governance, routine operations, risk management, capital disposal, deposit of provisions and emergency response arrangements must also comply with the PBC’s regulatory requirements for non-banking payment institutions.
HUMAN RESOURCES
Suzhou increases high-temperature allowance for employees
Suzhou has increased the high-temperature allowance that employers must pay employees from RMB200/month to RMB300/month with effect from 1 June 2018.
Employers are required under Chinese labour law to pay employees the allowance during the high summer temperature period every year if they work in “high-temperature conditions”. Under the law, “high-temperature conditions” refer to outdoor work temperatures exceeding 35°C or indoor work temperatures above
33°C.
The high-temperature allowances for different locations are shown in the table below.
| Location |
Allowance |
| Shanghai |
RMB200/month |
| Suzhou |
RMB300/month |
| Hangzhou |
RMB300/month for employees who work outdoors
RMB200/month for employees who work indoors |
| Guangdong province |
RMB150/month or RMB6.9/day |
Chinese cities announce local citizens’ average salaries in 2017
Several Chinese cities announced their local citizens’ average salaries in 2017. Some of these are shown in the table below.
| Location |
Average Annual Salary (RMB) |
Average Monthly Salary (RMB) |
| Beijing |
101,599 |
8,467 |
| Tianjin |
67,284 |
5,607 |
| Shanghai |
85,582 |
7,132 |
| Hangzhou |
67,047 |
5,588 |
| Shenzhen |
100,173 |
8,348 |
| Guangdong province |
80,020 |
6,668 |
ABOUT US
Established in 2001, SBA Stone Forest is a corporate advisory and public accounting group headquartered in Shanghai with offices in Beijing, Suzhou, Shenzhen, Chengdu and Hangzhou. We help foreign businesses set up in China and thereafter navigate its regulatory and business environment.
Discerning international businesses appreciate our Singapore heritage as it epitomises excellence, integrity and trust. We share the same systems, high standards, international best practices and service culture of our Singapore parent.
Together with our partner-owned public accounting practice, we offer intimate local knowledge and one-stop, hassle-free solutions for business assurance, accounting & advisory, payroll & HR advisory, tax compliance and advisory, risk management, and corporate advisory.
We are also well-positioned to help Chinese enterprises internationalise, given our Singapore parentage in a top financial and business hub in Asia, and our membership in the Allinial Global international network.
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