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CHINA - PERSONAL TAXATION AND SOCIAL SECURITY : CHINESE AND FOREIGN NATIONALS ON AN EQUAL FOOTING

The People's Republic of China has initiated an overhaul of its social security system, reformed the personal taxation regime and has extended the scope of these laws to foreigners residing in China.

This trend towards placing foreigners and Chinese on an equal footing is a logical consequence of China’s economic success. China no longer has any reason to favor its resident aliens or treat them differently. However, it does need all taxpayers to pay the sums they owe and, for this, it must supplement its legislative arsenal. In practice, many Chinese people and Chinese companies evade tax and the Chinese authorities are determined to put an end to this.

These two reforms harmonize the tax regimes applicable to foreign and Chinese companies, and are an illustration of this trend. Other reforms will follow, including in the areas of accountancy and company law.

In this document, we will only give two examples, relating to social security and personal taxation respectively, in order to illustrate these many changes, which will not fail to have an impact on the budgets of the foreign invested enterprises established in mainland China.

I - New social security law in mainland China, effective from July 1st 2011


II - The personal income tax reform 


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