deploy your talents effectively to/from … · 2014. 6. 25.  · big enterprises. pwc sharing of...

Deploy your talents effectively to/from mainland China

20 May 2014

www.pwcias.com

PwC

Agenda

1. An overview of challenges and development in 2013

2. Sharing of our observations

3. The latest developments

4. Opportunities and challenges in 2014

5. Q&A

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PwC

About our speakers

Louis LamPartner

Mr. Louis Lam, Partner, International Assignment Services, Southern China

Louis is a partner in International Assignment Services, with extensive experience specialising in mainland China and Hong Kong cross-border individual tax consulting and compliance services. His expertise includes drafting company policy and employment terms covering housing benefits, remuneration package structuring, tax equalisation, termination package and expatriate management; reviewing the design, tax implications and filing, and tax and forex registration of stock incentive plans; negotiating with tax authorities on tax investigation and penalty mitigation, and advising on cross-border social security requirements, etc.

Tel: +852 2289 5528louis.cs.lam@hk.pwc.com

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PwC

About our speakers

Sophie LuSenior Manager

Ms. Sophie Lu, Senior Manager, International Assignment Services, Southern China

Sophie serves clients from various industries including consumer products, financial banking, IT, manufacturing, etc.. She has rich experience in advising tax compliance risks, assignment cost management, tax planning strategies, remuneration package design, China social security compliance. Her other experience includes assisting companies to comply with immigration and working permit requirements and registration of employee equity incentive schemes with the local State Administration of Foreign Exchange (SAFE) and tax bureaux in various locations including Guangzhou, Beijing, Shanghai, Tianjin and Chengdu, etc.

Tel: +852 2289 5538sophie.lu@hk.pwc.com

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PwC

An overview of challenges and development in 2013

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PwC

An overview of challenges and development in 2013

Managing tax concerns for PRC national employees

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The latest updates• Enforcement of social security contribution

for expatriate employees• Tightened visa control for foreigners entering

into mainland China• Practice update for DTA exemption claim and

PN16 treatment

Increasing tax audit and tax interview activities on expatriate employees

Focus on tax filing of major/ big enterprises

PwC

Sharing of our observations

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PwC

Increasing tax audit or tax interview activities

• Individual income tax (IIT) nil filing basis adopted• Tax bureau reviewed/ questioned the filing basis• Asked for filing review/ rectification and stock plan

registration • Company selected as key tax revenue enterprise

Case 1:

Nil filing basis

• Tax bureau interviewed expatriate employees• Asked for information about non-taxable benefits,

equity plan, etc• Raised various enquiries to company HR

Case 2:

Interview of expatriate employees

• Representative office under de-registration and 3-year’s filing under review

• Ex-chief representative’s time apportionment claim under review

• Various challenges raised by tax bureau

Case 3:

Time apportionment claim of chief

representative

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PwC

Increasing tax audit or tax interview activities

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Key tax revenue enterprise form (1/3)

PwC

Increasing tax audit or tax interview activities

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Key tax revenue enterprise form (2/3)

PwC

Increasing tax audit or tax interview activities

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Key tax revenue enterprise form (3/3)

PwC

Increasing tax audit or tax interview activities

Items/ events triggering tax bureau’s attention for tax audit or tax interview

• Non-reporting or nil-filing

• Reported income below the average or reported income fluctuates

• Omission of offshore income reporting

• Compensation involving equity payment, commercial insurance and fringe benefits

• Change of key personal

• De-registration of the representative office

Major documents required for review

• Onshore and/or offshore employment contracts or secondment agreement

• Company’s compensation and benefit policies

• Employer returns (e.g. 56B, P60, W2) or salary certificate

• Employees’ overseas individual tax return and tax payment proof

• Travel record

• Outward remittance details

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PwC

Managing tax concerns for PRC national employees

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• Employee’s concern- What to report- When to report- How to report

• Employer’s concern- Withholding obligations- Tax arrangement - Filing assistance

• China tax authorities- Seek professional advice- Agree on filing procedures- Lack of experience

• Compliance process- Foreign tax credit- Documentary proof- Timing difference

• Inbound / outbound

• Locally hired

PwC

Managing tax concerns for PRC national employees

• Protocol in place in handling the tax compliance matters for Chinese nationals

• Mindful on seconding locally hired Chinese nationals to work in mainland China

• Tax equalisation arrangement applicable or not

• Effective communications between employer and employee

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Employer Employee

PwC

The latest developments

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PwC

Social security contribution enforcement

1. Who need to participate?

2. Who can be exempted?

3. How much is the monthly contribution?

4. What if the employer pays for my contributions?

5. Are there any refund upon departure?

?

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HK, Macau and TW residents

Secondment vslocal employment

Shenzhen

ShanghaiBeijing

Guangzhou

Foreign individuals

PwC

Tightened visa control for foreigners

Employees• Monetary penalty of RMB5,000 to RMB20,000• Detention from 5 to 15 days plus penalty• Repatriation to home country and prohibited from

entering PRC for 10 years (for serious offences)

Z visa

F visa

F visa For exchanges, visits, inspections, etc.

M visa

Z visa

R visa

S visa

For business or commercial purposes

Dependent visa

Work visa

High-level foreign experts who are in urgent need

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Employers• Monetary penalty of RMB10,000

per illegal worker (up to RMB100,000)

• Confiscation of relevant income

PwC

Practice update for DTA exemption claim and PN16 treatment

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Pitfalls of tax exemption claim by business travelers under double tax agreement

Application of the PN 16 treatment - a solution to the problem of double taxation

PwC

Opportunities and challenges in 2014

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PwC

Challenges and opportunities in 2014

• Tax audit trend

• Tax administration of outbound Chinese

• Exposures from frequent business travellers / secondment

• Annuity giving rise to tax deferral

• IIT Incentives in new areas (Hengqin, Qianhai)

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PwC

Challenges and opportunities in 2014

Qianhai (QH), ShenzhenHengqin (HQ),

Zhuhai

Macau (MO) Hong Kong (HK)

Qualified personOverseas talents and professionals in short supply

IncentiveEnjoy the rebate of individual income tax payment in QH exceeding 15% of the taxable employment income

Qualified personHK and Macau residents working in HQ

IncentiveEnjoy rebate of individual income tax paid in excess of the HK/ Macau personal tax calculated on such income

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• Staff deployment strategies impact• HR policies (e.g. TEQ) adjustment

PwC

Challenges and opportunities in 2014

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Qianhai: application and approval process

Assessment application

Review and Assessment

Assessment confirmation

Refund application Refund

QHA and other authorities review / assess employee qualification

Approved cases published to public, issue of confirmation letter

QHA will approve the application

Employee applies to employer, who applies to QH authority (QHA)

Tax rebate is deposited to employer’s bank account

PwC

Challenges and opportunities in 2014

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Hengqin: application and approval process

• Taxpayer / withholding agent or tax agents applies to HQ finance bureau (HFA)

ReviewApplication RefundApproval

• HFA reviews application package

• HFA approves application within 60 days of receipt of complete documents

• Tax rebate is deposited to employee’s bank account

PwC

Q & A

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PwC

Contact us

Mandy KwokManaging Partner+852 2289 3900mandy.kwok@hk.pwc.com

Edmund YangPartner+86 (10) 6533 2812edmund.yang@cn.pwc.com

Rebecca LaiPartner+86 (10) 6533 3065rebecca.lai@cn.pwc.com

Stacy KwokPartner+86 (21) 2323 2772stacy.kwok@cn.pwc.com

Jane CheungPartner+86 (21) 2323 3031jane.kc.cheung@cn.pwc.com

Gertie ChenDirector+86 (21) 2323 2628gertie.chen@cn.pwc.com

Berin ChanPartner+852 2289 5504berin.db.chan@hk.pwc.com

Jacky ChuPartner+852 2289 5509jacky.chu@hk.pwc.com

Louis LamPartner+852 2289 5528louis.cs.lam@hk.pwc.com

Robert KeysPartner+852 2289 1872robert.b.keys@hk.pwc.com

Theresa ChanPartner+852 2289 1887theresa.ky.chan@hk.pwc.com

Bruce LeeDirector+852 2289 5510bruce.ch.lee@hk.pwc.com

Steven LimDirector+852 2289 3998steven.lim@hk.pwc.com

Asia

North China

Central China South China & Hong Kong

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Thank you!

The information contained in this presentation is of a general nature only. It is not meant to be comprehensive and does not constitute the rendering of legal, tax or other professional advice or service by PwC International Assignment Services (Hong Kong) Ltd or any other entity within the PwC network. PwC has no obligation to update the information as law and practices change. The application and impact of laws can vary widely based on the specific facts involved. Before taking any action, please ensure that you obtain advice specific to your circumstances from your usual PwC client service team or your other advisers.

© 2014 PwC International Assignment Services (Hong Kong) Ltd. All rights reserved. PwC refers to the China or Hong Kong member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.