Rather than emphasize the higher costs and taxes, the state paper put a positive spin on the news in a headline saying: “Foreigners set for social benefits.” The “benefits” start on Oct. 15, it said.
Foreigners will be required to pay the Chinese government 11% of their salary, while employers will contribute 37% of their salary to the state, the newspaper said.
The salary open to taxation will be capped at no more than three times the average salary in any given city, meaning that the ultimate burden will be lower for expats whose salaries exceed that that amount.
Foreign business groups suggested to the government recently that participation in the social programs be optional as a large number of expats have existing insurance coverage. The system may benefit those without coverage and are willing to be treated in China’s healthcare system.
Meanwhile, the South China Morning Post reports that residents from elsewhere in Greater China may be excluded from the new regulations:
Chinese nationals from Hong Kong, Macau and Taiwan are likely to be exempt from the mainland’s new social security tax going into effect next month. But all expats from countries that have not signed bilateral agreements with Beijing will have to pay up to 11 per cent of their income to social security funds.
The new rule represents an about-face by Beijing, which previously planned to apply the tax to residents from Hong Kong, Macau and Taiwan. Two people who saw a draft copy of the rule said the ministry deleted the clauses involving residents from the three places in the final version. The ministry could not be reached for comment yesterday. “It’s not clear why the rule was revised to exempt the Hong Kong workers,” said one corporate official who is close to the regulators. “But the authorities have to clarify many details of the new policy since the impact will be huge on thousands of companies.”
Read more expat-related news here.