China

Registrations and Establishing an Entity

Before processing payroll in China, employers must register a legal entity in the country. Common structures include the Representative Office (RO), which typically takes two months to register, and the Wholly Foreign Owned Enterprise (WFOE), which takes approximately three months. A registered local entity is required prior to signing labour contracts or remitting taxes.

Banking

It is mandatory to make payments to both employees and the authorities from an in-country bank account. In general, banks are open from 0900 to 1700 Monday to Friday and are closed on weekends.

Working Week

The working week in China is Monday to Friday, with standard working hours from 0900 to 1200 and 1300 to 1800. Lunch breaks are typically one hour.

Employment Law

Holiday Accrual
Employees receive annual leave based on total career tenure:

• Less than 1 year: 0 days
  
  
• 1 to 10 years: 5 days
  
  
• 10 to 20 years: 10 days
  
  
• More than 20 years: 15 days
  
  

Maternity Leave
Employees are entitled to between 128 and 158 days of maternity leave, depending on the province.

Paternity Leave
Paternity leave varies by province and may not apply to foreign employees. Policies are usually determined by location or company discretion.

Sick Leave
Sick leave entitlement depends on the employee’s years of service and tenure with the employer. Sick pay is determined by local regulations and internal policies.

National Service
There is no compulsory national service in China.

Tax & Social Security

The tax year runs from 1 January to 31 December.

Income Tax
Individual Income Tax (IIT) is paid monthly and must be filed by the 15th of the following month. A standard deduction of RMB 5,000 per month applies. Tax is calculated on a cumulative basis using progressive tax brackets and quick deductions.

Social Security
Employers and employees must contribute to China’s Five Insurances: pension, medical, unemployment, work injury, and maternity. Rates and caps vary by city. Both parties also contribute to housing funds where applicable. All contributions must be reported and paid to local authorities each month.

Payroll

Payroll reports must be retained for at least five years. It is legally acceptable to issue electronic payslips to employees, and these are commonly used across industries.

Reports

Each month, employers must file reports with both the Social Security Bureau and the Tax Bureau. These include payroll summaries, contribution breakdowns, and employee details.

Payslip Example

(Local language example: not included in source)

Reporting

Employers must submit tax and social security filings by mid-month. All filings should be authorised and signed by the employer or their agent. Failure to meet deadlines may result in financial penalties.

New Employees

New employees must be registered with the local social security bureau by the 15th of the month if hired before that date. Required documentation includes personal identification and, for expats, work permits and passports.

Leavers

Final salary is usually paid prior to the regular payroll date. There is no obligation to notify authorities about an employee’s termination, though internal records must be updated accordingly.

Employee Benefits

Many employers offer supplementary benefits such as meal allowances, private health insurance, or transport subsidies. All expenses must be supported by official invoices (fapiaos) to qualify for tax deductions.

Expenses

Expenses such as travel or relocation may be reimbursed through payroll if properly documented. Any taxable benefits should be reported alongside employee income.

Visa & Work Permits

Foreign nationals must obtain a Z visa to work in China. This visa is valid for 30 days and must be converted into a residence permit and work permit after arrival. The work permit is typically valid for one year and renewable. Family members may apply for dependent visas. Employers must provide support documentation including an employment letter and permit notification.

Note that payroll services cannot be extended to employees working at foreign embassies or international media unless registered with the official DSB organisation, which most third-party providers are not affiliated with.

Social security rates, housing fund contributions, and leave entitlements may vary widely by province. Employers must ensure compliance with local rules for each location of operation. Provincial governments often implement region-specific adjustments to minimum wage levels and mandatory contributions.

Further Information

For more information, or assistance with China Tax inquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.