New Tax For Expats In China

Two Chinese cities, Tianjin and Suzhou, are preparing a new tax on Expats

London, UK (Pryce Warner International) January 12th, 2012 – The tax is part of a new social security program for Expat workers, and will make them eligible for local pension and medical benefits.

However, the decision has sparked disapproval from some employers. Despite other cities delaying the process in an apparent attempt to appease foreign companies who believe this will raise the cost of doing business in China, Tianjin and Suzhou are pushing directly ahead with it.

The two cities recently began registering foreign workers, who will have to pay an extra 11% of their salaries to the Chinese government. Companies will be required to pay 37% of their employees’ salaries, up to approximately $2000.

As this increased tax for companies is fairly high, many are concerned about the overall cost and impact this will have on them doing business in China. Some also suggest that this may lead to a reduction in the amount of foreign workers that come into the country.

One analyst stated that this tax “effectively increases a companies direct annual employment costs by approximately 50 000 Yuan (£5000) per Expatriate employee in larger cities”. Others have speculated as to how exactly Expats will benefit, as the majority of them already receive medical and pension benefits through the company they work for.

At present the system is taking longer to implement than expected, as it was supposed to be running three months ago. The delays are reportedly due to the government experiencing problems establishing secure payment methods. Some speculate that some authorities are merely trying to delay and stagger the process of implementing the scheme for fear or driving away foreign investment. Despite this it is expected that all companies hiring foreign workers will have to be in full accordance with the new laws by the end of the year.

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By Aneil Fatania
Financial Editor
Pryce Warner International Group
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