Housing fund contributions change for Beijing, Shanghai and Guangzhou
Provincial tax authorities recently announced an amendment to the regulations that govern tax free contributions to basic pension funds, basic medical insurance, unemployment and housing funds (Cai Shui (2006) Circular 10). Effective July 1, 2007, provincial supervision bureaus have put in place new regulations on housing fund contributions for Beijing, Shanghai and Guangzhou.
When it was issued last year, Cai Shui (2006) Circular 10 set a cap on the basic housing fund contributions actually made by the employer and employee that can be exempted from PRC Individual Income Tax (IIT). This is 12 percent – for the employer and employee contributions respectively – of an individual’s average monthly salary of the prior year, of the given location of the employee’s place of work, which is further capped at three times the city average salary of the previous year. The regulations also stated that employee contributions to the fund would be treated as deductible for PRC IIT purposes. For the basic housing fund, any part of contributions made in excess of the statutory limits specified is treated as normal salary and must be treated as subject to PRC IIT.
The new housing fund requirements are as follows:
The housing fund monthly payment upper limit for 2007 will be 2166 RMB, up 526 RMB from the previous year’s level of 1640RMB according to the Beijing Department of Statistics.
Companies located in these cities will need to ensure that they are in compliance with these recent changes. Because of the speed at which these new changes were brought about, many may find they lack a permanent solution to the change in benefits.
Dezan Shira & Associates maintain offices in Beijing, Shanghai and Guangzhou, advising foreign investors on legal administration, corporate establishment, due diligence and tax policy in the city. Please contact Sabrina Zhang in Beijing, Olaf Griese in Shanghai or Rosario Di Maggio in Guangzhou for more information.
- Previous Article AirAsia launches cheap flights to Shenzhen
- Next Article Beijing airport to open third runway in October