UPDATE : China : Change to Social Insurance Arrangements

Overview:  With effect from January 1st, 2019, responsibility for the collection of social insurance premiums (pensions, medical, unemployment, injury at work and materniy insurances) from employee salaries will pass from the local Social Insurance Bureau to the Local Tax Bureau.  This seemingly banal news has major implications.

Law change:  Currently the collection of income tax and social insurance premiums have been carried out by different local agencies. The local Social Insurance Bureau did not have access to the salary information available to the local Tax Bureau. As a result it could not check that the right amount of insurance premiums were being deducted each month from an employee’s salary. It is thought that there were many errors and likely under-collection.

In passing the responsibility for collecting social insurance premiums to the Tax Bureau it will quickly become clear whether the right deductions are being made.  As a result, it is anticipated than many companies will be caught out in breach.

The penalties for making incorrect deductions have not changed and include late payment fees of 0.05% per day and a penalty of three times the outstanding amount.

Action required:  Review your current deduction procedures to make sure they are based on full salary in accordance with the calculation rules. The chance of being caught in non-compliance will greatly increase after January 1st, 2019.