China: Compliance Check – Is Your Company Compliant with its Social Insurance Obligations?

Despite clear rules requiring both employers and employees to contribute to state social insurance schemes, many companies still remain in breach. In a crackdown intended to increase compliance, the tax authority will now be overseeing social insurance contributions.

What are the employer’s obligations?

Employers are legally required to participate in basic pension insurance, basic medical insurance, maternity insurance and other social insurances established by the state. Generally, participation is mandatory for both locals and foreigners.

What has changed?

The contributions required have not changed. However, earlier this year the CPC Central Committee announced that insurance contributions will now be checked by the tax authority (as opposed to the social security authorities). This change streamlines the information that the tax authority holds, and they will be able to compare the information provided by employers in relation to social insurance contributions against the information provided in relation to their tax affairs.

The expectation is that current breaches and underpayments of social insurance contributions will therefore be easier to identify.

What should employers do?

Employers should ensure that they are compliant with the various social insurance requirements in each of the locations they have employees.

Herbert Smith Freehills can assist you with achieving compliance. To discuss how, please contact Fatim Jumabhoy at fatim.jumabhoy@hsf.com.

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