China Regulatory Brief: Maternity Insurance Reform and VAT Invoice Verification
Maternity Insurance to be Combined with Basic Medical Insurance
On April 19, the Ministry of Human Resources & Social Security (MOHRSS) issued the “Notice on Reducing the Social Security Insurance Premium Rate in Stages.” The Notice stipulates that once relevant provisions are released and enacted, maternity insurance will be combined with basic medical insurance. In addition, starting May 1, the unemployment insurance premium rate may be reduced to one to 1.5 percent, and the individual payment rate will not exceed 0.5 percent. This reduction is planned to be made over a two-month period. Detailed schemes will be determined by each province or region individually.
28 Provinces Release Household Registration Reform Scheme
The Director of the National Development & Reform Commission (NDRC) Planning Department stated that 28 provinces and regions across China have announced their plans to reform the country’s long-standing household registration system. The NDRC also announced that a new “residence permit system” will be implemented comprehensively. The Chinese government will take further measures to reduce discrimination between local and non-locals when administering permanent household registration. However, it has been added that it is up to the migrant/rural worker’s discretion whether or not to apply for permanent household registration.
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Nationwide Suspension of the Registration of Enterprises Engaged in Financial Industry
China’s crackdown on the finance sector has been initiated, with policing and supervision of investment, financial, consulting, and asset management firms underway. Applicants looking to establish enterprises with finance related vocabulary in either their name or scope of operation will not be able to register at local branches of the State Administration for Industry and Commerce (AIC). Terminology such as exchange, finance, asset management, wealth management, fund, investment, private equity, online loan and borrowing, P2P, equity crowdfunding, internet finance and payment, etc. are to be targeted and suspended. This measure has been taken since a number of cases of illegal seizure of deposits and fraud by P2P operators and asset management firms emerged late last year.
B-Class Taxpayers Exempt from VAT Invoice Verification
Along with the country’s value-added tax (VAT) reform, China’s tax bureau recently released the “Announcement [2016] No.23” to build a more favorable tax environment for VAT taxpayers. The Announcement stipulates that companies which have been recognized by the tax bureau as “B-Class” taxpayers will be exempt from verification when they use VAT invoices issued by the sellers to offset their VAT liability. Furthermore, VAT taxpayers that are newly covered by the May 1 VAT reform will be exempt from VAT invoice verification during a grace period of three months from May to July. Instead, they may use the online VAT invoice management system for tax reduction purposes. Previously, only companies classified as an “A-Class” taxpayer by the tax-paying credit grade are exempt from invoice verification.
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