The epidemic of COVID-19 in Mainland China has been slowing down. Before work resumption, you should know how to properly handle the situation from the administrative and human resources perspective. Special attention should be paid to the local administrative rules regarding the work resumption.

To answer some of the most common concerns, our CW China Consulting Team would like to draw your special attention to the following points:

  1. Related Government Documents:
  • The Ministry of Human Resources and Social Security of the People’s Republic of China issued the Notice on Properly Handling Labor Relations During The Prevention And Control Of Pneumonia Epidemic Of New Coronavirus Infection on 24 January 2020.
  • The State Council of the People’s Republic of China announced on 26 January 2020 that the Lunar New Year and Spring Festival holiday would be extended to 2 February, across the country. The holiday week was originally from 24 January to 30 January.
  • Guangdong Province and some other cities or provinces have formally required enterprises (except those organizations involved in providing basic services for residents and those involved in combating the spread of the virus) not to resume work prior to 10 February 2020.
  1. Labor Relationship:
  • If the employee had already applied for annual leave prior to the announcement of the holiday extension, it is recommended to deal with this situation on the principle of benefiting the employee.
  • If one of your employees gets infected with the Coronavirus Disease 2019 (COVID-19), and he/she is either at home or in hospital, by law they are classified as being under medical treatment, and your company is unable to terminate the labor relationship with this employee.

The labor contract between the employer and the employee shall be extended automatically until the medical treatment or quarantine is over.

Enterprises shall pay remuneration to employees during the above-mentioned period.

If the labor contract expires during this period, the period shall be extended to the expiration of the medical treatment period, the expiration of the medical observation period, the expiration of the quarantine or the termination of the emergency measures taken by the government.

  • Some employees may be unable to return to work or may be unwilling to return to work. The company should review the statement or application provided by the employees. If it is reasonable, the company should allow the employees to self-isolate, and both parties can negotiate and arrange work at home, use annual leave, personal leave and other ways to deal with, according to the actual situation.
  • An employee who is reluctant to return to work without reasonable cause is considered absent from work and should be dealt accordingly with the company’s employee handbook.
  • If an employee has to take care of his/her children whose classes have been suspended or is pregnant considering that her health and safety will be in jeopardy, the employee and the employer shall negotiate in time to adjust the working hours, working methods, job duties, salary, etc.
  1. Allowance and Bonus Problems:
  • For handling the payment of allowances and bonuses, the regulations in the employee handbook or the terms of the labor contract should be followed. In this regard, the clarification should be provided for allowances and/or bonuses that are fixed, or whether the allowance is based on the actual amount provided by the employees.

CW is glad to assist your company to prepare for the resumption of work. You need not worry about the administrative work involved.  If you have any queries, please do not hesitate to contact Ms. Phenix Zheng of our China Consulting Team at phenix.zheng@cwhkcpa.com.

Written by Galo Rodrigo, Latin Department, CW CPA

2020 is destined to be remembered as a turbulent period in the human history. The outbreak of COVID-19, which is declared by WHO as a global pandemic, is impacting the world’s social and economic environment profoundly. As the first country hit by the epidemic, China is taking aggressive measures slowing down the spread of the coronavirus.

China nowadays is responsible for 17% of the world’s economy and drives 30% of the world’s GDP growth, taking a much higher stake compared to during the SARS epidemic period in 2003. Since mid-February when the outbreak in China reached its peak, the Chinese government has already started making plans to restart the economy by a series of economic and financial policies.

First and foremost, to save the small businesses from running out of cash, China’s central bank has injected RMB 1.2 trillion ($174 billion) into the market and reduced the interest rate for commercial lenders to 2.5%. The State Council also ordered large state-owned banks to increase lending to small businesses by at least 30 percent in the first half of 2020. At the same time, the central government encouraged local governments to draft up support policies to help small businesses pay less, including phased tax cuts, postponed payments, deduction and waiver of social insurance fees, as well as discounts in utilities fees.

Under the waves of economic stimulus, businesses in China are racing to find silver linings in the looming presence of economic slowdown. Supermarkets, traditional food markets, restaurants, gyms, and those used to rely on physical space are adapting to new business models for online sales. Many restaurants recently received takeout orders that have accounted for 90% of the business. Hema (盒马), a fresh food retailer, has seen a surge of online orders during the epidemic and has recruited more than 1,500 employees from over 30 suspended catering companies. The logistics industry, although largely impacted by the travel ban, is still busy arranging daily deliveries to the local communities. Some health clubs and gyms are aiming at online marketing to enhance customer relationship by streaming teaching videos. Online education, internet medical treatment and online office solutions are also developing rapidly.

In the space of just a few weeks, business owners have, of necessity, begun to transform their businesses in a digital way. Some may struggle, and hopefully most will make it through. Take a moment to remember how JD.COM became one of the biggest online retailers in China. During SARS outbreak in 2003, Mr. Richard Liu, the founder of JD.COM, suffered RMB 8 million in less than a month. When the company had only 3 months’ of cashflow available to burn, he closed his brick-and-mortar shop and launched a retail shop online, which evolved to JD.COM today.

All of that said, there are also sound reasons to be concerned about how small companies can survive the COVID-19 outbreak when China’s economic landscape is much different from that during SARS. Just before the COVID-19 made its entry on the stage, the country’s economy was already slowing with multiple consumer sectors suffering weak demand, rising labor costs, growing debt and rapid aging. During the coronavirus outbreak, the closure of businesses has inevitably caused many companies to suffer huge sunk costs such as rent, salaries, inventories, etc. Even when the outbreak is over, the public needs time to overcome the fear of activities that require social interaction. Businesses have legitimate reasons to be uncertain about sustaining profitability.

Regardless, one thing is clear – the coronavirus is staying with us for a while. Businessmen may be restricted from traveling to close deals by shaking hands. But they are not restricted from looking for new business opportunities through innovation and change. China will continue to roll out policies to stimulate the economy along with the measures to contain the outbreak. It is advisable to study these policies carefully, as the government policy is usually a good compass pointing to the direction of the country’s next economic focus. Funds and incentives are available in the development of strategic sectors. When the outbreak is over, China will accelerate the recovery by rewarding those who stick around.

Written by Delilah Li, China Consultancy Team, CW CPA

On 26 February 2020, the Financial Secretary of the Hong Kong Special Administrative Region, Mr. Paul Chan Mo-po, delivered the 2020-21 Budget Speech.

Faced with the Sino-US trade conflict, other external factors and unexpected outbreak of the novel coronavirus, the Financial Secretary’s 2020-21 budget is focused on supporting enterprises, safeguarding jobs, stimulating the economy and relieving people’s burden.

2020-21 Budget Highlights

We summarize the 2020-21 budget’s key highlights relating to salaries tax, profits tax, measures to smoothen livelihoods, support enterprises and achieve diversified economy, as follows:

Smoothen livelihoods

a) HK$10,000 cash payout to Hong Kong permanent residents aged 18 or above

b) Salaries Tax and tax under personal assessment for 2019-20 will be reduced by 100%, subject to a ceiling of HK$20,000 (2018-19: HK$20,000). The reduction will be reflected in the final tax payable for the year of assessment 2019-20

Support Enterprises

a) Profits Tax for 2019-20 will be reduced by 100%, subject to a ceiling of HK$20,000 (2018-19: HK$20,000). The reduction will be reflected in the final tax payable for the year of assessment 2019-20

b) Concessionary low-interest loan

c) Waive rates for non-domestic properties for 2020-21, subject to a ceiling of HK$5,000 per quarter in first two quarters and HK$1,500 per quarter for remaining two quarters

d) Waive the business registration fees for 2020-21

e) Waive registration fees for company annual returns for 2 years

Continue to implement relief measures announced last year

f) Electricity charges for non-residential account: subsidise 75% of charges for 4 extra months, subject to a monthly cap of HK$5,000

g) Water and sewage charges of non-domestic households: waive 75% of charges for 4 extra months, subject to a monthly cap of HK$20,000 and HK$12,500 respectively

Achieve diversified economy, Innovation and technology

a) Issue inflation-linked retail bonds and Silver Bonds totalling not less than HK$13 billion

b) Issue green bonds totalling HK$66 billion in next 5 years

c) Waive stamp duty on stock transfers paid by the Exchange Traded Fund (ETF) market makers when creating and redeeming ETF units listed in Hong Kong

d) Establish a limited partnership regime and provide tax concession for carried interest issued by private equity funds to attract them to domicile and operate in Hong Kong

e) Earmark HK$3 billion to take forward Phase 2 of the Science Park Expansion Programme

f) Increase the grant ceiling under the Technology Voucher Programme to HK$600,000 and raise the Government’s funding ratio to 75%

g) Inject HK$345 million for a pilot subsidy scheme to encourage the logistics industry to enhance productivity through the application of technology

h) Additional funding of HK$150 million for the Hong Kong Trade Development Council to assist Hong Kong enterprises in exploring business opportunities

Hong Kong expects a record deficit of HK$139 billion for 2020-2021 that is mainly due to the one-off relief measures of around HK$120 billion. However, the forecast of deficits over the next 5 years, ranging from HK$7 billion to HK$17 billion, means that a holistic review of Hong Kong taxation system is a top priority for the Hong Kong Government to attain Hong Kong’s fiscal health.

Written by May Tung, Tax Advisory Services, CW CPA

 

Appendix

Proposed Budget and Summary of Hong Kong Taxes 2020-21

 

PROFITS TAX

*For 2019-20, the profits tax is proposed to be reduced by 100%, subject to a ceiling of HK$20,000. (2018-19: HK$20,000)

SALARIES TAX

  • Salaries tax is charged at the lower of net chargeable income (Total Income – Deductions – Allowances) at progressive rates or net total income (Assessable Income – Deductions) at standard rate.
  • Standard rate remains the same at 15%.
  • Progressive rates are as follows:

*For 2019-20, the salaries tax and tax under personal assessment are proposed to be reduced by 100%, subject to a ceiling of HK$20,000. (2018-19: HK$20,000)

Allowances

Deductions

PROPERTY TAX

The standard rate (for non-corporate owners) remains at 15% for 2020-21.

The ongoing coronavirus COVID-19 outbreak has caused disruptions to businesses in different sectors, not only in China but also across the globe. Ever since China’s annual Spring Festival holiday, the country has united to fight together against the spread of this epidemic through various methods, such as by extending the holidays and requiring people to stay at home. Recent statistics have indicated that the number of new infections is declining, and major cities in China have issued guidelines for companies that wish to resume work as soon as possible. This article provides a few suggestions on how businesses shall cope with the impacts of the Coronavirus COVID-19 Outbreak.

 

Wage payment calculation during the epidemic control period

China has stringent employment laws and regulations to protect the legal rights and benefits for the Chinese employees. Employment relationship management during the epidemic outbreak period is a real-life test to examine how strong your HR compliance management is. A lot of companies have asked their Chinese employees to work from home after the Spring Festival holiday. As we approach the end of February, please make sure that your payroll calculation is in line with the central and local government rules, especially for employees that have worked during the extension of Sprint Festival holiday ( 31 January – 2 February), delayed work resumption period (3 February – 9 February) and after 10 February. 

Know how to apply interim policies to ease the cash flow burden

Healthy cash flow is vital to the survival of any business. The Central Government is committed to helping businesses in all sectors to resume work and production by providing financial relief such as loan interest discounts and tax benefits as well as encouraging local government to roll out further policies for reducing the financial burden of small-and-micro businesses. Pay attention to the provincial and district policies which may apply to your company, such as reducing rent and recruitment costs, extending tax filing and social insurance contribution deadlines, providing allowances for online employee training, adopting flexible hour working schedule, etc.

Is your company required to file an application before resuming work?

Affected by the outbreak, most provinces have announced a delay to work resumption until 10 February. After that date, a filing system with the local government has been implemented before companies resume work in many cities. This filing system requires most companies to assume responsibility for preventing and controlling the spread of coronavirus among employees and to cope with the on-site inspection by government personnel. While you are eager to see your employees back to work, please do not forget to check the local requirements for preparing for the resumption of work.

Fulfilling regulatory obligations while avoiding travel

As the outbreak is still ongoing, city lockdown and travel restrictions are currently in effect. Consequently, it is difficult to fulfill your regulatory obligations by filing applications physically. You may try to make telephone inquiries to the relevant local authorities on whether the online application of submission by mail/courier is possible. In most cases, it’s best to postpone your travel plans or engage a local agent to run the errands. If you need to send important documents to China, it is worth noting that the ongoing outbreak will cause some delay in cross-border customs clearance. 

Risk management strategy

The WHO has declared the current outbreak as a “Public Health Emergency of International Concern”. Certainly, you should respond rapidly to protect the health and safety of the local workforce. But make sure that the management team is not too distracted by monitoring and mitigating the medical risk. Your risk management strategy should also address the business aspects, such as supply chain, sales and marketing, customer relationships, operations, and HR procedures, how to stay strong with minimal economic impact for now, and how to drive the business back on track after the outbreak is under controlled.

Transforming your organization digitally

Every threat comes with an opportunity. The coronavirus outbreak has caused many businesses to re-consider digital transformation in how they operate. As a result, online communication tools such as Skype, Zoom, Microsoft Teams, become a daily necessity. Employers are forced to use online software to monitor the whereabouts of the employees and their working schedules. How long the outbreak will last is still unknown. What’s certain is that many companies will continue to reap the benefits of integrating digital tools into their organizational management. Efficiency can be achieved by encouraging employees to work from home. Colleagues develop habits of participating in online discussions actively. Administrative overhead costs and paperwork can be reduced significantly.  

Written by Edwin Yin and Toby Wong, China Consultancy Team, CW CPA

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How technology can help your human resources team save time and costs – Introducing our E5talent HR management platform

Has your team in mainland China returned to the office after the coronavirus outbreak? Please do not hurry in opening the physical premises immediately if your team has not resumed duty yet.

Enterprises should pay special attention to the local administrative rules regarding the work resumption. Please make sure that your enterprise has followed the policy measures closely and completed the necessary paperwork required by local authorities to apply for resumption of work with a disease control team at the street or district level in advance.

We have summarized some of the general requirements as follows.

1. Prevention and control mechanism are in place
Enterprises should formulate and improve epidemic prevention and control measures and emergency plans. Accountability system and the responsibilities of each person-in-charge at all levels shall be defined. An epidemic prevention and management system shall be established.

2. Staff monitoring is in place
Enterprises must do a good job of employee monitoring and registration. Each employee who resumes duties shall have his/her health conditions and travel history within the past 14 days reported to the enterprise. For those employees who are from or have been to seriously affected areas, a record should be set up and health management measures shall be taken. They may report duty if they do not have symptoms after 14 days of observation. Those who are still stranded in seriously affected areas should be asked to postpone their return to the office.

3. Facilities and materials are in place
Enterprises must prepare necessary epidemic prevention materials, such as infrared thermometers, disinfectants and surgical masks, and set up quarantine areas. Enterprises whose conditions do not allow such set up should specify the quarantine observation sites and register with the local bureau according to the unified arrangements of the located city and the district.

4. Internal management is in place
Enterprises should do a good job of ventilation, disinfection and sanitation management of the workplace and the staff quarters. In principle, enterprises should adopt “closed-off” management and a flexible work system. It is strictly forbidden that unrelated personnel enter the workplace of the enterprise. Body temperature of all entering personnel should be detected. Enterprises should encourage the implementation of shift work, online work platforms, videoconferencing and decentralized dining in order to reduce the staff movements and the risk of mass gathering.

5. Publicity and education are in place.
Enterprises should formulate staff training plans for epidemic prevention and control. Propagandas should be set up in prominent locations of the workplace for the mass education of epidemic prevention and control, improving the knowledge of the personnel. Publicity and education should be properly done through multiple channels.

Prior to the resumption of work, the company should take measures to ensure the health and safety of all the employees. Epidemic prevention facilities and materials, such as quarantine areas, surgical masks and disinfectants, should be prepared.

CW is glad to assist your company to prepare for resumption of work. Once you decide to resume the physical premises for work, please let us know and do not worry about the administrative work involved. Please plan ahead accordingly.

Written by Edwin Yin and Toby Wong, China Consultancy Team, CW CPA

 

A Brief Introduction of Foreign Investment Law and the Implementation Regulations

 

At the beginning of January 2020, the “Foreign Investment Law of the People’s Republic of China” and the “Implementation Regulations for the Foreign Investment Law of the People’s Republic of China” (hereinafter referred to as the “Foreign Investment Law” and the “Implementation Regulations”) officially came into force, providing a legal guarantee for continuously optimizing the foreign investment environment and promoting a higher level of opening up.

The promulgation of the Foreign Investment Law and the Implementing Regulations is of milestone significance. Its main positive effects can be easily detected in the following aspects:

  1. The definition of “Foreign Investment”

According to the Foreign Investment Law, foreign investment refers to any investment activity directly or indirectly carried out by foreign natural persons, enterprises or other organizations (hereinafter “foreign investors”), including the following circumstances in which:

  • a foreign investor establishes a foreign-funded enterprise within the territory of China, either alone or together with any other investor;
  • a foreign investor acquires shares, equities, property shares or any other similar rights and interests of an enterprise within the territory of China;
  • a foreign investor invests in any new project within the territory of China, either alone or together with any other investor; or
  • a foreign investor invests in any other way stipulated under laws, administrative regulations, or provisions of the State Council.

For the present Law, a foreign-funded enterprise refers to an enterprise incorporated under Chinese laws within the territory of China and with all or part of its investment from a foreign investor. Besides, the Implementation Regulations interpret “other investors” as including Chinese natural persons

  1. The Principle of Unifying Market Access Standard for Domestic and Foreign Investment

In the past, foreign investment had to go through a full set of filing system or even approval system operated by the market supervision department, commerce department and etc. before entering the Chinese market, which might be very complicated and time-consuming. What’s more, there were also some local or industrial special provisions inconsistent with the law and regulations, making the entry threshold for foreign investment more stringent than it appeared.

Since 1 January 2020, the Ministry of Commerce, the National Development and Reform Commission and the Ministry of Justice have organized all regions and departments to conduct a comprehensive clean-up of the current relevant and effective laws, regulations and normative documents, repeal or amend the provisions that are inconsistent with the Foreign Investment Law and its Implementation Regulations. Moreover, it is stipulated that:

  • domestic and foreign enterprises will be treated equally in terms of project declaration, land supply, tax relief and qualification license;
  • foreign enterprises shall participate in the formulation and revision of national, industrial and local standards on an equal footing according to the law;
  • the government and its relevant departments shall not restrict foreign-funded enterprises from entering the government procurement market or implement differential and discriminatory treatment.
  1. Management System of “Pre-establishment National Treatment and Negative List”

Article 4 of the Foreign Investment Law stipulates that the State adopts the management system of pre-establishment national treatment and Negative List for foreign investment. The term “pre-established national treatment” refers to the treatment given to foreign investors and their investments at the stage of establishment, acquisition and expansion of enterprises, which is no less than that given to domestic investors and their investments.

The so-called Negative List refers to the special administrative measures for foreign investment in specific areas stipulated by the state. The state shall grant national treatment to foreign investment that is not on the Negative List. Now, we have a full set of foreign investment guiding system, which includes Negative List plus Industry Guidelines on Encouraged Foreign Investment and a Negative List for Market Access for both foreign and domestic investment.

  1. Abolishment of the Three FIE Laws

Since the Foreign Investment Law and its Implementation Regulations came into force on 1 January 2020, the existing three laws and their implementing rules (collectively Three FIE Laws) governing the establishment of Sino-foreign equity joint ventures, Sino-foreign co-operative joint ventures and wholly foreign-owned enterprises and their operations in China have been repealed simultaneously.

However, there are still some normative documents such as departmental rules, local regulations, local rules and judicial interpretations that may not be suitable for abolishing at once, nor can they be screened one by one in a short time. For this reason, the Implementation Regulations stipulate that in case of any inconsistency between the provisions on foreign investment formulated before 1 January 2020 and the Foreign Investment Law and the Implementation Regulations, the provisions of the Foreign Investment Law and the Implementation Regulations shall prevail.

Also, for established foreign-invested enterprises, Article 42 of the Foreign Investment Law stipulates a five-year transitional period during which established foreign-invested enterprises may continue to maintain their original organizational forms, etc. In another word, during this 5-year transitional period, foreign-invested enterprises can choose either staying the same organizational form or going through a change procedure according to Company Law or Partnership Enterprise Law. If an enterprise has not changed its form after the transitional period, it shall be regarded as a violation of the law and the market supervision department will not handle the change or filing procedures of any registered items of the enterprise.

  1. Investment Management: Foreign Investment Information Reporting

Foreign investors or foreign investment enterprises shall submit investment information through the enterprise registration system as well as the enterprise creditworthiness information announcement system to the commerce administrative authority.

The contents, scope, frequency and detailed workflow for foreign investment information reporting shall be determined and announced by the commerce administrative authority of the State Council jointly with the market regulatory authority of the State Council and other relevant authorities. The commerce administrative authority and other relevant authorities shall strengthen information sharing and shall not require foreign investors or foreign investment enterprises to submit such investment information which can be obtained through inter-departmental information sharing.

In short, the approval and filing system has already been replaced by the information reporting system. For most foreign-invested enterprises, commerce filing is no longer required because such information will be shared by the governmental departments.

Written by Edwin Yin, China Consultancy Team, CW CPA

Shanghai Pilot Free Trade Zone (FTZ) was officially established on 29 September 2013, covering an area of 28.78 square kilometers, originally including four special customs supervision areas, namely, Shanghai Waigaoqiao Free Trade Zone, Waigaoqiao Bonded Logistics Park, Yangshan Bonded Port Area, and Shanghai Pudong Airport Comprehensive Free Trade Zone.

 

The Shanghai FTZ became a new experimental field for China’s economy, for it has implemented a number of reform measures such as the transformation of government functions, financial system, trade services, foreign investment, and tax policies, and will vigorously promote the development of Shanghai’s entrepot and offshore businesses.

 

In the past years, the Shanghai FTZ successfully intrigued a huge number of investors from all over the world. These achievements can never separate from its preferential governmental policies and foreign-friendly investment environment, which can be categorized as follows:

 

  1. Negative List Management

Foreign investments in those industries outside the Negative List are treated equally as domestic investments. That is to say, the establishment and amendment of foreign-invested enterprises are subject to a filing system same as that for domestic companies. At present, the Negative List management model has been fully popularized and replicated throughout the country, but the Negative List in the FTZ is less restrictive than that outside the zone.

 

  1. Encouraging Services, Manufacturing and Some Other Hign-End Industries

Since the FTZ was established, two batches of 54 opening measures have been successively introduced in the service sector and some manufacturing sectors. Some of these opening measures have been replicated outside the zone, while some of them are still being piloted in the zone.

 

  1. Simplification of Government Procedures

In the past, establishing a foreign-invested enterprise required the approval of the National Development and Reform Commission, the Commerce Commission, Administration of Foreign Exchange, and other relevant government departments, which normally took 3-6 months. Now, projects valued under 300 million US dollars only need to make a filing in the free trade zone, which can be completed within 3 working days.  

 

  1. Customs Supervision Policies

Inside the special customs supervision area in the FTZ, there is a series of new institutional arrangements in terms of trade facilitation, such as navigation and customs clearance, inspection and quarantine, and selective taxation. The FTZ has also promoted the rapid development of a series of new customs service businesses, including a “one-stop” government service window for international trade, supervision of goods status, etc.

 

  1. Encouraging Policies for Financing

Financial opening and innovation are the key points of FTZ reform. At present, the split-account accounting based on free trade accounts and overseas local and foreign currency financing is still only being piloted in the FTZ. The cross-border RMB two-way capital pool and the centralized operation and management of foreign exchange funds at the headquarters of multinational companies, which are well received by enterprises, have been replicated nationwide, but they are still more convenient in the FTZ region than outside the region.

 

  1. Leading the Establishment of the Rule of Law

To give full play to the exemplary role of the Shanghai FTZ, the Shanghai government established rules and guidance systems for urban planning and construction, land management, economic development, social management, public services, etc. Besides, a judicial system with international credibility and a new mechanism for administrative law enforcement was established. To meet the needs of FTZ finance and high-tech industries, specialized platforms such as FTZ financial arbitration, high-tech and intellectual property arbitration was built to integrate professional resources and improve service levels.

 

Over the past 6 years, through the effort of a regional linkage mechanism, the FTZ has given full play to its demonstration effect and provided sufficient impetus for development. The FTZ area was enlarged to more than 120 square kilometers, and there are now 7 free trade areas. What’s more, recently on 12 September 2019, the Shanghai government released Several Opinions of Shanghai Municipal People’s Government on Further Promoting Foreign Investments, which explicitly depicts the future development layout of the FTZ.  

 

All in all, the practical experience of the Shanghai FTZ is a precious wealth to China. As its financial reform keeps pushing forward, the FTZ can surely make more contributions to the accelerating process of the internationalization of RMB and greatly increase China’s influence on the world’s economy.

 

Written by China Consultancy Team, CW CPA

How technology can help your human resources team save time and costs – Introducing our E5talent HR management platform

In the evolving world, technology has been playing a key role in corporate success.  As an essential element of a sound corporate structure, an effective human resources function is increasingly utilizing specialized software and cloud computing.  The era of paper documents and excel software is fading.  To cater the growing market with technological proliferation, solutions have been developed by HRM service providers.  Companies of various sizes, including yours, could benefit from these technological solutions:

  • Integrating technology in HR management allows you to access data at any time and from anywhere across the globe.

Imagine that you are on the way home on a metro train and are suddenly asked by your boss to retrieve some data from the salary records of your subordinates.  Are you going to go back to the office immediately?  The answer was probably “yes” some years ago.  With HRM software and solutions that are easily integrated with mobile apps, you are now able to access information pertaining to human resources records of your staff and yourself using your personal mobile devices.  These records may contain attendance, leave applications and performance status.  Simultaneous transfer of data among applications can also increase the transparency across various departments in your organization.

  • Internal approval workflows become not only paperless, but also transparent and traceable instantly.

Automated processes of internal approvals are facilitated by HRM solutions.  After your staff applies for internal approval in expenses reimbursements or leave, the information can be transferred to his/her respective manager or the human resources team directly.  The approval trail is recorded with access logs.  Exchange of paper documents is not required, and there is no delay of information relay caused by the mishandling of paper documents.  If a procedure is stuck, you can immediately check its status online and find out whom you are going to follow up with, regardless of your location.

 

HRM Solutions for SMEs

While developing your company’s own software may be costly, CW offers a readymade cloud-based platform for users of small and medium-sized enterprises (SMEs) – E5Talent.  E5Talent is an all-in-one system throughout Hong Kong, Macau, Taiwan, Mainland China, and other Asia Pacific Regions with the following features:

  • It enables personnel management, including payroll, leave application, and attendance management;
  • Fully compliant with local statutory requirements, it is flexible in parameter setting and user-defined workflows for employee and manager self-service;
  • It allows customized authorization process for each function, maintains access logs and generates audit trail reports. After all, nothing could be more important than safeguarding your firm’s interests.

The use of cloud technology enables you as a potential user to adopt modern HRM solutions at reasonable prices without the need to constantly upgrade or replace the systems by yourselves.  Without the necessity of building infrastructure in your office, you can save huge upfront costs of installation. 

You may pay monthly fees based on the usage, the number of employees, and the specific functions your company needs.  With the help of the software, you may not need huge HR, and IT teams to manage the human resources and IT issues.  You can transform their roles to boosting productivity and cooperating with external providers or deploy the human resources to other business areas.

Knowing the above advantages of HRM solutions, are you eager to adopt a suitable one for your China operation?  Please do feel free to contact our CW team for a preliminary consultation.

Contact:

Ray To

ray.to@cwhkcpa.com

Lily Xiang

lily.xiang@cwhkcpa.com

Written by Toby Wong, China Consultancy Team, CW CPA

Six Punitive Measures to Watch Out When Hiring Foreigners Working in China

With the development of international business in China, more and more foreigners come to work in China. While they can take advantage of the enormous market potential, it is strongly advisable to deal with the hiring process involving foreign employers with discretion to avoid possible penalties. Below are some common mistakes that you should avoid at all costs.

  1. Invitation letter with false information

A foreigner applying for a visa is required to provide an invitation letter issued by an organization or individual in China. The organization or individual issuing the invitation letter shall be responsible for the authenticity of the contents of the letter.

Any individual who provides false information in an invitation letter for a foreigner shall be subject to a fine ranging from RMB5,000 to RMB10,000.

Organizations presenting false information in invitation letters shall be subject to a fine ranging from RMB10,000 to RMB50,000. The person-in-charge at the organization shall be punished pursuant to the penalty mentioned in the preceding paragraph.

Meanwhile, any illegal income shall be confiscated, and the offender shall be ordered to bear the traveling expenses of the invited foreigner.

  1. Refusal of presenting immigration documents for inspection

Foreigners who refuse to present visas, identification documents, residence permits for inspection shall be given a warning and may be subject to a fine of not more than RMB2,000.

  1. Failure to update residence permit

Registration items of a foreigner’s residence permit include name, gender and date of birth, purpose, residence period, date and venue of issuance, passport (or other international travel document number) and etc.. If there are any change(s) in any of the above items, the permit holder shall complete registration change formalities with the public security authorities within 10 days from the date of change. Offenders shall be given a warning and may be subject to a fine of not more than RMB2,000.

  1. Failure to complete registration formalities within 24 hours from arrival

Foreigners who are residing or staying in a residence other than a hotel shall complete registration formalities personally or through the accommodation providers with the public security authorities at the place of residence within 24 hours of arrival. Failure to do so shall render the offender liable to a fine of not more than RMB2,000.

  1. Working in China illegally (without work and residence permits)

Foreigners working in China illegally shall be subject to a fine ranging from RMB5,000 to RMB20,000. In more severe violations, the offender may be detained for a period of more than five days but less than 15 days and be subject to a fine ranging from RMB5,000 to RMB20,000.

Persons arranging for foreigners to work illegally in China will also be held responsible. For each illegally employed foreigner, the offender shall be subject to a fine of RMB5,000 but a total fine of not more than RMB50,000. Companies arranging for foreigners to work illegally in China shall be subject to a fine of RMB5,000 for each illegally employed foreigner but the total fine shall not exceed RMB100,000. Any illegal income shall be confiscated.

Persons or organizations who employ foreigners illegally shall be subject to a fine of RMB10,000 for each illegally employed foreigner but the total fine should not more than RMB100,000. Any illegal income shall be confiscated

  1. Engaging in activities inconsistent with the declared purpose of stay or residence

Foreigners engaging in activities which are inconsistent with their purpose of stay or residence may be ordered to leave China within a stipulated period. Foreigners who are being deported shall not be allowed to enter China within 10 years from the date of deportation.

We hope that the above tips can help you avoid unexpected violations of laws and regulations when hiring foreigners. Given that the rules and regulations in China with relation to employing foreigners can be rather complicated, to carry out the hiring process legally, seeking advice from local professionals is recommended.

Should you need any advice, please contact our visa team:

Contact:

Ms. Jacqueline Zhang (jacqueline.zhang@cwhkcpa.com)

Written by China Consultancy Team,  CW CPA

Macao advantages as a bridge between China and Lusophone countries

The Macao Special Administrative Region may only have gained worldwide prominence with the advent of the liberalization of the gaming industry (casino) less than two decades ago, but it is important not to devalue what was and still represents Macao: a trading post. Macao’s history as a colony dates back to the 18th century. XVI when it was voluntarily ceded by China to the Portuguese to facilitate trade. Since then, this peaceful coexistence between East and West has defined Macao, making it an attractive business hub given the region’s stability and uniqueness, which is currently celebrating its twentieth anniversary of its return to the Chinese administration.

That said, the connection with Portugal, or with Lusophony, has never been lost, which is noticeable in the fact that the Portuguese language remains one of the official ones (together with Chinese). As such, official documents are almost all bilingual, and Portuguese is still heard in various public and private services (although in this latter context English is also often an option).

Another noteworthy aspect has been China’s investment in Portuguese-speaking countries (PALOPs), which has been carried out directly or through Macao. Forum Macao, as it is known, is a China-funded organization that aims to facilitate trade cooperation with the PALOPs. Moreover, at the advent of the Macao International Fair (MIF), it is worth noting this and other events held in Macao to promote products from around the world and in, which various buyers participate.

For any business owner, the difference in tax burden is currently an important aspect of decision making. In Macao, given the considerable government revenue from gambling tax, corporate income tax is limited to only 12%. The same applies to the amount of profits after deduction of the exemption, which varies each year from MOP600,000 for the 2018 financial year, currently equivalent to about USD74,273. Also, there is no dividend tax, which means that net income is the amount the end-day investor takes home. Business taxation is divided into two groups of taxpayers, one of which is based on presumed income. To do so, the annual statement provided by the Finances must include the total amount of income and expenses – overall, Macao has a much easier bureaucracy. Likewise, the personal income tax is progressive up to a maximum of 12%. Since the employer is only required to withhold and pay social security contribution (which is not high). Besides, there is no value-added tax and Macao is considered a free port, there are no customs duties on imported products. Also, the Macao Government has entered into various double taxation agreements.

Another interesting aspect is the Mainland and Macao Closer Economic Partnership Arrangement (CEPA), which gives Macao companies privileged access to the interior of China, including the export of certain goods. types of products exempt from customs duties. Company formation in Macao is a relatively simple procedure open to any investor and can be done remotely. The subsequent opening of a bank account currently requires (depending on the requirements of KYC), in addition to the usual documents, proof of the existence of a (legitimate) business, final beneficiary and, in most banks, a personal journey in front of the counter.

It is therefore advisable to set up the company first, which may take up to 1 month (two weeks minimum for registration with the Conservatory), with a subsequent director traveling to Macao to handle the opening procedures of bank account. In this context (as anywhere), professional assistance can be a valuable help in saving time in making any investment in the region.

This text is only a basic guide and should not be taken as a reference for making investment decisions in Macao as the specifics of the case may translate into the application of different rules.

Written by Jose Alvares, Partner, CA Lawyers – Macao

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