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Y2021 New Payment Base Adjustment For Social Security And Provident Fund
According to the notice from Shanghai Municipality on the payment base adjustment of social security and provident fund in 2021, combined with the data of the average salary of employees in 2020, we have completed the payment base adjustment in 2021.
Please refer to details as below.
EFFECTIVE DATE:
Effective month of the new payment base：Jul,2021
The payment base will be adjusted from Jul 1st,2021 and finally paid at early Aug 2021.
PAYMENT BASE ADJUSTMENT:
Social Security
The Maximum Payment Base : RMB 31,014/month
The Minimum Payment Base : RMB 5,975/month
Provident Fund
The Maximum Payment Base : RMB 31,014/month
The Minimum Payment Base :RMB 2,480/month
Please refer to the official notice and detailed explanation for the above payment base adjustment.
The specific calculation standard refers to Y2020 annual average salary data of employees.
Legal Support:
Social Security
https://mp.weixin.qq.com/s/re3XWWE1iwEzSmqsze9fkg
Provident Fund
https://mp.weixin.qq.com/s/vi5ajbwHUNENlcbnzE3dJw
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What tax types a WFOE need to pay?
1) VAT= Value-Added Tax
For smaller tax payer, the VAT=( revenue/(1+3%)×3% ;
For general tax payer, the VAT=( revenue/(1+3%)×6%/ 13%- input VAT
VAT 6% is for service and VAT 13% is for trading.
But the VAT tax rate is different for different company types , the main tax rate is 3%，6%，9%，13%. The current preferential tax policy for smaller tax payer is, you can enjoy VAT tax exemption if monthly revenue less than RMB 100,000 and less than RMB 300,000/quarter.
2) Company surtaxes
The surtaxes mainly includes urban construction tax, national education tax, and local education tax.
3) Enterprise Income Tax =Profit tax
The payable Enterprise Income Tax =annual profit X 25%
China government released preferential tax policy from Y2019 till Y2021, we summarized as below:
a) If Annual profit less than RMB 1 million, the enterprise just pay 5% profit tax according to current preferential policy;
b) If Annual profit more than RMB 1 million and less than RMB 3 million, the enterprise profit tax is 10%;
c) If Annual profit more than RMB 3 million, the enterprise profit tax is normal 25% of your total profit, cannot enjoy above preferential tax policy.
4) Stamp Duty
The payable stamp duty = revenue x0.03%
Stamp duty is a very important regulatory tax. The tax rate of stamp duty follows the principle of light tax burden and joint burden. So the tax rate is lower to 0.03%.
For example:
The stamp duty for business license is only RMB 5
The stamp duty for house lease contract is only 0.1% of total contract value;
Business contracts including Purchase and sales contracts, technology contracts just need to pay 0.03%. Even though, China government always release short-term relief policies to further reduce the burden on enterprises.
5) Exporting Tax Refund
If you do exporting business from China to outside of China, then basically you can enjoy tax refund after exported. The tax refund rates are from 0% to 13% specified based on HS Code of your products. The exporting tax refund will not be returned automatically but need to be applied by exporter through fixed procedures.
Below key information is very important:
A. Exporter must have Exporting Tax Refund Certificate;
B. All exported goods must have input VAT fapiao/ invoice from suppliers, and all the basic information must be matched.
C. All the products were exported through China customs legally with all necessary documents.
D. Other requirements from tax bureau.
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When should a new WFOE declare tax after established?
The newly established company shall start accounting and tax works within 15 days after business license released. If the company do not declare taxes to the tax authority over 3 months, then tax authority has right to cancel your tax certificate according to the tax management rules.
Even you don’t have business at first few months and just declare taxes as ZERO, but you must do it in time, that’s the rules.
Legal Support from State Taxation Administration:
http://www.chinatax.gov.cn/n810341/n810755/c3357578/content.html
Article 22: Taxpayers engaged in production or business operation shall, within 15 days from the date of receipt of the business license or occurrence of tax obligation, set up accounting books in accordance with the relevant provisions of the State. The accounting books mentioned in the preceding paragraph refer to general ledger, subsidiary ledger, journal and other auxiliary account books. General ledger, journal shall adopt the form of this.
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What types of WFOEs can be established?
The enterprises can be classified into domestic company and foreign company/ WFOE according to the nationality of their shareholders.
According to the different forms of shareholder liability, the enterprises can be classified into limited company, partnership, foreign representative office, etc.
According to the business scope or business purpose, WFOE can be classified into
●Consulting WFOE (all services & consulting business)
●Technology WFOE (Design, multi-medias, IT, networks etc.)
●Trade WFOE (import and export of some products or even local trade only)
●F&B WFOF (Restaurant, bar, coffee shop, drink shop, snack shop etc.)
●Manufacturing WFOE
All China companies have clear business scope and must operate their business based on approved business scope. Basically, the business scope will decide the WFOE type, requirement, procedure and lead time. So, if you want to setup your company in China, please do self-evaluate what business you’d like to do firstly.
