In order to stimulate employment in China, the government has decided to introduce several tax incentives for enterprises from January 1, 2024, until the end of 2027. These incentives aim to attract specific groups of people, such as the unemployed, the poor, veterans, fresh graduates of colleges and universities, etc.
Enterprises that recruit the aforementioned key groups, sign a labor contract with them for a period of one year or more, and pay social insurance for their employees in accordance with the law, are entitled to tax incentives such as flat-rate tax refunds and reductions in filing declarations.
Specific concessions include: enterprises will deduct VAT, urban maintenance and construction tax, education surcharge, local education surcharge, and enterprise income tax based on the number of people actually recruited. The flat rate is RMB 6,000 per person per year, with a maximum increase of 30%, i.e., each person can enjoy a maximum of RMB 7,800 per year in tax incentives. Over three consecutive years, the enterprise can obtain a tax rebate subsidy of up to RMB 23,400 for each key population employee.
Therefore, what documents do we prepare for applying for these tax incentives? The process is outlined as follows:
1. Labor contracts signed with significant groups (including electronic labor contracts), social insurance premiums paid, and employee file (including electronic information) .
2. If the firm hires individuals out of poverty, it must retain materials (including electronic information) that verify the relevant persons are out of poverty.
3. Those who have been registered as unemployed for more than half a year are required to keep their Employment and Entrepreneurship Certificate, Employment and Unemployment Registration Certificate, and the Certificate of Recognition of Enterprises Absorbing Employment of Key Groups issued by the Human Resources and Social Security Department, or the relevant certificates and documents issued (including electronic information) for verification; for those regions that have previously communicated their audits and reviews to tax authorities through information exchange, companies may no longer be required to retain the appropriate materials.
When declaring taxes, relevant individuals can simply enter the necessary basic information into the e-Tax Bureau, with key groups entering their names, civil status numbers, and types of personnel, and independently employed retired soldiers entering their names, civil status numbers, types of retirement documents, and time of retirement.
Additionally, there are some notes regarding this policy:
Taxpayers who declared and paid tax prior to the announcement can continue to benefit from the policy if the tax deducted does not exceed the new limit. If it does, they must suspend the declaration until subsequent increases in operational time or staff recruitment occur, and the deduction limit is restored to a positive value before they can resume benefiting from the policy.
To minimize duplication, firms can only use one identity for employees with multiple identities. However, if the relevant individual leaves the organization, the tax refund policy will no longer apply.
Priority groups or veterans who are re-employed after leaving their previous occupations will remain eligible for insurance for their remaining preferred time. Enterprises re-hiring these personnel will receive priority.
In 2024, our government implemented tax incentives for significant groups, a critical step toward promoting the growth of micro and small companies and individual entrepreneurs. Enterprises and people should aggressively pursue these policy possibilities to support their own growth and success. While pursuing their own growth, they also contribute to social harmony and economic progress. However, starting in January 2024, employers will no longer receive tax refund subsidies for retired employees. Companies need to reconsider their human resource strategies, especially concerning staff retention and budgetary planning.
At PHC Advisory, we can offer you full support on matters regarding doing business in China, or any other issues your business may face. If you would like to know more about policies relevant to your business in Italy or Asia, please contact us at info@phcadvisory.com.
PHC Advisory is a company of DP Group: an international professional services conglomerate of companies with approximately 100 experienced professionals worldwide. We offer comprehensive services in tax, accounting, and financial consulting, including financial supervision, financial audit, internal audit, internal control over financial reporting, and support for audited financial statements and annual audits, ensuring clients' financial transparency and compliance.
Would you like to learn more about the business environment in China? Click the link and download our Practical Guides on Amazon!
The content of this article is provided for informational purposes only, financial advice must be tailored to the specific circumstances on a case-by-case basis, and the contents of this article do not legally bind PHC Advisory with the reader in any way.
If you want to know more about doing business in China, please have a look at our previous articles:
+86 21 6256 7995
info@phcadvisory.com
