Compliance with China’s Individual Income Tax Law and related regulations continues to be a problem for foreign companies operating within in China. Hwuason’s Employee Remuneration and Benefits lawyers have extensive experience in assisting companies to prepare appropriate employee remuneration and benefit packages that both comply with the relevant tax rules and provide the most tax efficient outcome.

Individual Income Tax compliance check
Employees in China, particularly foreign employees, rely heavily on their employers in respect of compliance with individual income tax obligations. The consequences for non-compliance, for both employers and employees, are extremely serious. Hwuason’s lawyers are experienced at reviewing employers individual income tax procedures to ensure that relevant legal and tax obligations are being met.
Areas that should be reviewed for compliance include:

• Housing benefits and reporting of other fringe benefits;
• Equity-based compensation
• Terms of employment agreements;
• Secondment and other dual contract/split pay arrangements;
• Employment terms for legal compliance;
• Employer reporting processes.

Executive Compensation
Attracting the best caliber of talent is critical to the success of any business. This requires offering candidates a compensation package with the best after tax value but that minimises the potential tax risks.
Hwuason can help you to design appropriate executive compensation schemes, including negotiating the terms of the employment agreements and implementing equity-based compensation arrangements.

Design and Implementation of Employee Share Plans
The use of employee share plans for Chinese employees of foreign companies in China is relatively new, but it is quickly becoming common for foreign employers to adopt such a method of remuneration. An employee share plan of a foreign listed company must be registered with the State Administration of Foreign Exchange (SAFE) before it can be offered to employees located in China. Accordingly, the design and implementation of such schemes in China are relative unique and a sensitive approach is required.
Hwuason’s assistance in relation to employee share schemes includes:

• Advising on plan design choices
• Drafting of plan documents to ensure that the they comply with Chinese law and take maximum advantage of the possible tax opportunities.
• Administration of the share scheme.
• Drafting of related employee communications.
• Filing documents with SAFE.

Advising on social insurance and related benefits 
China has an array of mandatory social insurance and housing schemes for Chinese national employees. The requisite obligations differ depending upon the location of the employment. The failure of to adequately meets these obligations is a extremely common compliance issue for foreign enterprises in China and is often the source of employment related disputes.
Our professional can assist with:

• Determining the appropriate level of mandatory employer and employee contributions;
• Providing appropriate advice on structuring employee benefits in a way that complies with national and local laws and also takes advantage of the opportunities.
• Advising on the comparable obligations across localities.

Dispute Resolution

Proactive tax planning is the best way to avoid any enduring problems with the tax authorities, and is particularly important given the current aggressive stance taken by the tax authorities in relation to the collection of tax from foreign residents. Unfortunately, where appropriate planning has not been put in place or where a more creative benefits package has been implemented, employees and employers may face investigation by the relevant tax authorities. Hwuason’s lawyers have the requisite experience you need in negotiating with the authorities and where required commencing legal proceedings.

Disputes may also arise with employees, either during employment or after the employee’s employment has concluded, in relation to employee remuneration and benefits. Hwuason can advise in relation to the risks inherent in such disputes, negotiate with the employer/employees involved or act on your behalf in relation to any legal proceedings commenced by the employee.