On December 21, 2018, the State Administration of Taxation (SAT) in China introduced changes to its Individual Income Tax (IIT) law, intending to ease the tax burden for mid and low-income earners, while getting tougher on high-income earners and foreign workers.
The IIT Law passed in June 2018, and the new IIT system came into force on January 1, 2019. The new law brought forward changes that affect the take-home pay of every employee and payroll processing for every employer in China.
In addition to IIT, employers and employees in China generally must contribute to social insurance payments. In some jurisdictions, foreign employees can opt-out of social insurance payments, such as in Shanghai.
Employers usually withhold IIT and social insurance payments and paid to tax authorities every month. Given the scope of the changes and the potential for closer regulatory scrutiny from tax authorities, businesses are advised to assess and implement relevant changes to their ERPs to comply with them.
LATEST HCM PATCH FOR IIT 2019 UPDATES
To address the changes introduced in IIT, Oracle released the following patch required by EBS 12.1 and 12.2 HRMS customers in China.
12.1: Patch 29335551:R12.PAY.B
12.2: Patch 29335551:R12.PAY.C
This patch delivers the updates to the income tax calculations in the following areas:
- Fixed Tax Reduction
- Severance payments
- Employee transfers
- Payslip updates
Please see Document 2506078.1 – People’s Republic of China: Individual Income Tax updates effective 2019 – II for full details.
As such, to take full advantage and to minimize compliance risks, businesses will need to review their ERP systems, accounting processes, and documentation within a short time. IT Convergence can help you navigate the complexities of compliance in China and the Asia Pacific.
For more information on how to manage your ERP in APAC, visit our website.
Want to learn more about China’s VAT recent changes? Download our E-Book: “5 Big Changes to China’s VAT in 2019”.