Social Insurance in China: Prepare Your Business for Big Changes on 1 January, 2019

Published on 2018-12-11

On 1 January, 2019, employers will need to have their business ready for a big change to China’s social insurance system: social insurance contributions will be levied by China’s tax bureau.

Over the last few years, local tax bureaus in many cities began collecting social insurance contribution payments on behalf of the social insurance bureau. In these cases, what the tax bureau did was essentially accumulate the social insurance fund and then transfer it to the social insurance bureau.

The tax bureau did not have the responsibility to check the social insurance fund; authorities did not request the employees’ contribution base to be recorded onto the tax bureau’s online system.

Social insurance in China

Under the new rule, the tax bureau will have much more responsibility: the tax bureau will be in-charge of social insurance collection and will check if the social insurance contribution base corresponds with the payment amount.

Employers in China need to review their social insurance processes.

As time is short before 1 January, Dezan Shira & Associates Human Resources and Payroll team have made a shortlist of the changes that will make the biggest impact and address the most frequently asked questions on how to be ready for the transition and its impact on compliances.

Tips for employers

  1. Employers that pay the minimum social insurance contributions for employees need to be careful with calculations because the tax bureau will be able to spot short payments;
  2. Employers that have not treated social insurance contributions for dispatched employees or low-cost workers seriously need to review their practices immediately because the tax bureau will inspect all salary related information, personal data, and social insurance information together with the company’s tax information;
  3. Employers need to register and pay social insurance for employees in company-registered cities because the tax bureau will identify grey practices (such as using a local agency to pay social insurance for an employee in a city where the company is not registered; the employee’s tax account will show no social insurance payment);
  4. Employers need to treat the new collection method seriously because the tax bureau can affect business-as-usual if social insurance payments are not done on time and in full;
  5. Employers should be aware that in recent years the authorities have increased penalties for companies that are not compliant with social insurance regulations, particularly for non- and under-payment, and we expect these penalties to become more severe after 1 January.

Read more FAQs here.