Monday 6th June 2011

Picture of Beijing

Expats living in China may be expected to pay higher taxes if a current plan to extend China’s social-security program to foreign nationals goes ahead.

The new tax was outlined in China’s new Social Insurance Law that was published last October yet went largely unnoticed by journalists and expats living in China until it’s planned implementation of the 1st of July was highlighted to the media last Tuesday. It is anticipated that all foreign workers will be required to pay new social security taxes that will vary according to the location in which they live. The average payable is expected to be in the region of $100 USD per month although in some cities charges of 11% of an individual’s monthly income will be made. In return for the payment, expats and foreign workers will be permitted access to retirement benefits and subsidized healthcare in state owned hospitals.

Highlighting the new requirements to the state-run press in China, Xu Yanjun, deputy director of the Ministry of Human Resources and Social Security, said: "the move will ensure foreign employees in China enjoy the same social insurance benefits as Chinese nationals do.

"All foreign employees who work in China for longer than six months must be included in the social security system."

While expats will face increased taxes, their employers will be even harder hit, with employers being expected to pay in the region of 37% of each employee’s monthly income up to a locally set threshold. For example, expats living in Shanghai will be taxed on a maximum monthly income of approximately $1800 USD. They will be expected to contribute $198 USD per month under the new social security tax system and their employees will be expected to pay $666 USD in taxes.

Workers from countries that have signed social insurance agreements with China could be exempt from some of the fees, Xu said. At present, Germany and South Korea have such agreements in place.

Lu Xuejing, a social security expert from Capital University of Economics and Business, commented on the planned policy, stating that she felt the new requirements will encourage employers to face up to their responsibilities when employing foreign workers: "The move would help foreign workers enjoy social security benefits in China, especially laborers from developing Southeast Asian countries who could better deal with their medical treatment here," she said.

However, she also warned that the new policy may lead to a fall in the amount of jobs available for foreign workers in China.

Read the full article: http://www.ft.com/intl/cms/s/0/635b7646-8ba3-11e0-a725-00144feab49a.html#axzz1OSh3Vmju

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