Deploy your talents effectively to/from mainland China

Transcription

1 Deploy your talents effectively to/from mainland China 20 May 2014

2 Agenda 1. An overview of challenges and development in Sharing of our observations 3. The latest developments 4. Opportunities and challenges in Q&A 2

3 About our speakers Louis Lam Partner Mr. Louis Lam, Partner, International Assignment Services, Southern China Tel: Louis is a partner in International Assignment Services, with extensive experience specialising in mainland China and Hong Kong cross-border individual tax consulting and compliance services. His expertise includes drafting company policy and employment terms covering housing benefits, remuneration package structuring, tax equalisation, termination package and expatriate management; reviewing the design, tax implications and filing, and tax and forexregistration of stock incentive plans; negotiating with tax authorities on tax investigation and penalty mitigation, and advising on crossborder social security requirements, etc. 3

4 About our speakers Sophie Lu Senior Manager Ms. Sophie Lu, Senior Manager, International Assignment Services, Southern China Tel: Sophie serves clients from various industries including consumer products, financial banking, IT, manufacturing, etc.. She has rich experience in advising tax compliance risks, assignment cost management, tax planning strategies, remuneration package design, China social security compliance. Her other experience includes assisting companies to comply with immigration and working permit requirements and registration of employee equity incentive schemes with the local State Administration of Foreign Exchange (SAFE) and tax bureaux in various locations including Guangzhou, Beijing, Shanghai, Tianjin and Chengdu, etc. 4

5 An overview of challenges and development in

6 An overview of challenges and development in 2013 Increasing tax auditand tax interviewactivities on expatriate employees Managing tax concerns for PRC national employees Focus on tax filing of major/ big enterprises The latest updates Enforcement of social security contribution for expatriate employees Tightened visa controlfor foreigners entering into mainland China Practice update for DTA exemption claim and PN16 treatment 6

7 Sharing of our observations 7

8 Increasing tax audit or tax interview activities Case 1: Nil filing basis Individual income tax (IIT) nil filing basis adopted Tax bureau reviewed/ questioned the filing basis Asked for filing review/ rectification and stock plan registration Company selected as key tax revenue enterprise Case 2: Interview of expatriate employees Tax bureau interviewed expatriate employees Asked for information about non-taxable benefits, equity plan, etc Raised various enquiries to company HR Case 3: Time apportionment claim of chief representative Representative office under de-registration and 3-year s filing under review Ex-chief representative s time apportionment claim under review Various challenges raised by tax bureau 8

9 Increasing tax audit or tax interview activities Key tax revenue enterprise form (1/3) 9

10 Increasing tax audit or tax interview activities Key tax revenue enterprise form (2/3) 10

11 Increasing tax audit or tax interview activities Key tax revenue enterprise form (3/3) 11

12 Increasing tax audit or tax interview activities Items/ events triggering tax bureau s attention for tax audit or tax interview Non-reporting or nil-filing Reported income below the average or reported income fluctuates Omission of offshore income reporting Compensation involving equity payment, commercial insurance and fringe benefits Change of key personal De-registration of the representative office Major documents required for review Onshore and/or offshore employment contracts or secondment agreement Company s compensation and benefit policies Employer returns (e.g. 56B, P60, W2) or salary certificate Employees overseas individual tax return and tax payment proof Travel record Outward remittance details 12

13 Managing tax concerns for PRC national employees Employer s concern - Withholding obligations - Tax arrangement - Filing assistance Employee s concern - What to report - When to report - How to report Inbound / outbound Locally hired China tax authorities - Seek professional advice - Agree on filing procedures - Lack of experience Compliance process - Foreign tax credit - Documentary proof - Timing difference 13

14 Managing tax concerns for PRC national employees Employer Employee Protocol in place in handling the tax compliance matters for Chinese nationals Mindful on seconding locally hired Chinese nationals to work in mainland China Tax equalisationarrangement applicable or not Effective communications between employer and employee 14

15 The latest developments 15

16 Social security contribution enforcement Secondment vs local employment Beijing Shanghai Foreign individuals Guangzhou Shenzhen HK, Macau and TW residents? 1. Who need to participate? 2. Who can be exempted? 3. How much is the monthly contribution? 4. What if the employer pays for my contributions? 5. Are there any refund upon departure? 16

17 Tightened visa control for foreigners F visa F visa M visa For exchanges, visits, inspections, etc. For business or commercial purposes Z visa Work visa Z visa R visa S visa High-level foreign experts who are in urgent need Dependent visa Employers Monetary penalty of RMB10,000 per illegal worker (up to RMB100,000) Confiscation of relevant income Employees Monetary penalty of RMB5,000 to RMB20,000 Detention from 5 to 15 days plus penalty Repatriation to home country and prohibited from entering PRC for 10 years (for serious offences) 17

18 Practice update for DTA exemption claim and PN16 treatment Pitfalls of tax exemption claim by business travelers under double tax agreement Application of the PN 16 treatment - a solution to the problem of double taxation 18

19 Opportunities and challenges in

20 Challenges and opportunities in 2014 Tax audit trend Tax administration of outbound Chinese Exposures from frequent business travellers/ secondment Annuity giving rise to tax deferral IIT Incentives in new areas (Hengqin, Qianhai) 20

21 Challenges and opportunities in 2014 Qualified person Overseas talents and professionals in short supply Hengqin (HQ), Zhuhai Macau (MO) Qianhai (QH), Shenzhen Hong Kong (HK) Incentive Enjoy the rebate of individual income tax payment in QH exceeding 15% of the taxable employment income Qualified person HK and Macau residents working in HQ Incentive Enjoy rebate of individual income tax paid in excess of the HK/ Macau personal tax calculated on such income Staff deployment strategies impact HR policies (e.g. TEQ) adjustment 21

22 Challenges and opportunities in 2014 Qianhai: application and approval process QHA and other authorities review / assess employee qualification QHA will approve the application Assessment application Review and Assessment Assessment confirmation Refund application Refund Employee applies to employer, who applies to QH authority (QHA) Approved cases published to public, issue of confirmation letter Tax rebate is deposited to employer s bank account 22

23 Challenges and opportunities in 2014 Hengqin: application and approval process Application Review Approval Refund Taxpayer / withholding agent or tax agents applies to HQ finance bureau (HFA) HFA reviews application package HFA approves application within 60 days of receipt of complete documents Tax rebate is deposited to employee s bank account 23

24 Q & A 24

25 Contact us Asia Central China South China & Hong Kong Mandy Kwok Managing Partner Stacy Kwok Partner +86 (21) Berin Chan Partner Bruce Lee Director North China Edmund Yang Partner +86 (10) Rebecca Lai Partner +86 (10) Jane Cheung Partner +86 (21) Gertie Chen Director +86 (21) Jacky Chu Partner Louis Lam Partner Robert Keys Partner Steven Lim Director Theresa Chan Partner

26 Thank you! The information contained in this presentation is of a general nature only. It is not meant to be comprehensive and does not constitute the rendering of legal, tax or other professional advice or service by International Assignment Services (Hong Kong) Ltd or any other entity within the network. has no obligation to update the information as law and practices change. The application and impact of laws can vary widely based on the specific facts involved. Before taking any action, please ensure that you obtain advice specific to your circumstances from your usual client service team or your other advisers International Assignment Services (Hong Kong) Ltd. All rights reserved. refers to the China or Hong Kong member firm, and may sometimes refer to the network. Each member firm is a separate legal entity. Please see for further details.