China offers great potential for companies looking to expand or grow their business overseas. With the 2nd largest economy in the world and over 1.3 billion people, China has a strong urban and rural work force and many opportunities for growth.

There can be challenges to expanding and managing payroll in China. There are frequent changes to rules and regulations taking place at the provincial level, more than 11 languages spoken with many regional dialects, and many cultural differences and expectations in business transactions. There are complex business structures, and a controlled currency. The tax year ends on December 31, and taxes must be filed by March 31 each year.

The types of companies registered in China can include:

  • Wholly Foreign-Owned Enterprise (WFOE) – companies started by foreign nationals with no investors/connections from China (mainland)
  • Joint Venture (JV) – companies that are established by foreign nationals and Chinese mainlanders
  • Representative Office (Rep Office) – an office representing a company not registered in China
  • State Owned Enterprise (SOE) – businesses owned by the Chinese government
  • Private Enterprise – a company that is registered without government by individuals or groups
  • Individually Owned – a company owned by one person that must be a Chinese citizen

Corporate tax rates can vary between 10 – 25%, depending on the type of company. The minimum wage in China is set by local governments. Provinces including Guangxi, rural Liaoning, Hunan, and Anhui have the lowest minimum wages in the country. Shanghai increased the minimum wage in 2018 and may increase again in 2019. st be submitted by employees with the following information by March 31, 2018 if they meet the following criteria:

  • Annual income exceeds RMB 120,000
  • Earn income from two or more difference sources in China
  • Earn income that is derived from sources outside of China
  • Receive taxable income for which there is no withholding agent
  • Meet any other conditions that are specified by the State Council

Employers must pay Individual Income Tax and Social insurance each month – partially paid by employer and partially deducted from employee salaries. Annual self-declaration forms must be submitted by employees if they meet the following criteria:

  • Annual income exceeds RMB 120,000
  • Earning income from 2 or more sources in China
  • Earning income derived from sources outside of China
  • Receiving taxable income with no withholding agent
  • Any conditions specified by the State Council

As of 2019, foreign nationals may not be required to pay tax on income earned from sources outside of China.

To simplify payroll and compliance in China, you need help navigating the cultural nuances and continuously changing provincial laws and regulations. Our cloud-based payroll technology with customized monthly reporting helps you ensure compliance, keep up with changes, and easily manage your employees in China. Our US-based and in-country experts can help when questions come up. Get started with easy-to-use technology and save time and resources in China.