Jan. 2012 - Further clarification on social insurance for foreigners working in China

The Chinese social insurance scheme covers five types of social insurance contributions including pension, medical, work-related injury, unemployment and maternity insurance. Previously, foreigners working in China are not required to participate in the Chinese social insurance scheme. However, the situation has changed.

According to the Chinese Social Insurance Law (“the Law”), foreigners working in China can refer to the Law and participate in the social insurance scheme effective from 1 July 2011.
According to the Interim Measures for the Participation of Foreigners Employed in China in the Social Insurance(“Decree No. 16) issued by the Ministry of Human Resources and Social Security (“MOHRSS”), foreigners working in China must participate in the social insurance scheme effective from 15 October 2011.

Following the release of the above measures, there were discussions regarding whether the participation of foreigners working in China in the social insurance is an optional “can” in accordance with the Law or a compulsory “must” in accordance with Decree No. 16.

On 2 December 2011, MOHRSS issued Notification on Guiding Measures for Foreigners Working in China to Participate in the Social Insurance (“Decree No. 113”), which clarifies that the participation of foreigners working in China in the social insurance scheme is a must.

However, foreign employees who come from countries that have concluded totalisation agreements with China could be exempted from certain Chinese social security contributions in accordance with such agreements.

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Key points worth noting

The key points of Decree No. 113 include:

Foreigners working in China who meet the participation requirements should participate in the Chinese social insurance scheme from 15 October 2011.
Foreigners working in China who meet the participation requirements should register with the MOHRSS authorities by 31 December 2011, if they have started working in China before 31 December 2011. Otherwise, there could be late payment surcharges.

Not all cities have implemented Decree 16 or Decree 113. The implementation status in certain major cities as of 15 January 2012 are available in our newsletter.

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Jan. 2012 - Mazars Tax alert - Further clarifications on Social Insurance

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