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Shanghai Expat Forum Index » Hot Topics Forums » Visas, Taxes, and Legalities

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bigroh73

Reacher

Joined: July 13, 2003
Posts: 316
Location: Shanghai
Status: Offline

Posted: June 28, 2009 - 11:04 PM

Hello,

I'm wondering if you have any advice. Other people have recommended I post my last note on your forum for a definite answer - hope you can help.

My significant other (Shanghai woman, 32yo) was laid off from her job. Technically, according to her company (para-legal division of B&M), she was "not renewed" - which they say is different to being terminated - thus her payout is quite small - equivalent to just over 2mths salary, including all her unused leave, etc.

Every person we both speak too offers different advice - so not sure what is correct or not. Please let me know.

bigroh73 wrote:

Thanks for some of the useful answers, and the other entertaining ones. This is a common problem in Shanghai - various answers to the same issue.

Because her contract was not terminated, but "not renewed" in official speak, she is not eligible for much of a payout, even under the new Labor Law. Prior to the new law, she would have got nothing, now she gets about 2 months plus holiday pay and other unused leave, etc.

Wonderful generosity from Baker & McKenzie - she worked there for over 5yrs and held a senior management position. They gave her some indication that it might happen 2 weeks before, with official confirmation that her contract would not be renewed just a few days prior to her final day. I guess B&M are well known for being a mean Co.
She's ok - already had a few job offers from other places - she just hates them for being so mean to a long-term employee.

erexchen

Reacher

Joined: Aug 14, 2006
Posts: 279
Location: Shanghai
Status: Offline

Posted: June 29, 2009 - 09:06 AM

It's true the severance payment for not-renewed employee shall start from January 1, 2008. And one year one month salary as severance payment and no more than triple of local monthly employee's salary for each working year.

erexchen

Reacher

Joined: Aug 14, 2006
Posts: 279
Location: Shanghai
Status: Offline

Posted: July 09, 2009 - 04:05 PM

China to strength efforts on individual income tax collection regarding stock transfer

The State Administration of Taxation issued Notice on Administration of Individual Income Tax Collection regarding Stock Transfer (hereinafter “Notice”) on May 28, 2009. The Notice emphasizes the liability of individual income tax payment by individual shareholders for the stock transaction and a strict procedure is set to avoid tax evasion.

According to the Notice, after the stock transfer is completed, the seller, or the buyer who acts as withholding agent, shall report the individual income tax to the tax authority and get the tax payment receipt. And then they can go and apply for change of shareholders in the industrial and commerce bureau.

The tax rate for individual income regarding the stock transaction in unlisted company is 20%, according to the law.

Under this system, the seller/buyer cannot apply for the change of shareholders in the government until the tax has been duly paid. Furthermore, the tax authority can examine the agreed price for stock transfer. If the agreed price is at an unreasonably low level, the authority can decide the price for tax payment according to the net asset value per share or net asset value of the proportion of shares owned by the individual shareholder.

Currently in China, individual investment is common and stock transaction is increasing rapidly. The largest amount of individual income tax paid ever regarding stock transaction is RMB 560 million, which was paid by Mr. Zhang Dazhong, founder of Beijing Da Zhong Electronics Co. Ltd for his selling of shares to Gome Electrical, No.1 home appliance retailer in China.

erexchen

Reacher

Joined: Aug 14, 2006
Posts: 279
Location: Shanghai
Status: Offline

Posted: Aug 03, 2009 - 06:04 PM

Setting Up a Resident Representative Office in China

INTRODUCTION

Starting your business by setting up a representative office in China is an effective and relatively cheap way. However, a representative office is not an independent legal entity. It is prohibited from engaging in direct business activities, such as manufacturing, production and sales. So its business scope is limited. The activities it may engage include liaison with potential client, product introduction, market research, technology communication etc.

The main purpose of a representative office is to guide market research, supervise/coordinate purchase/sales activities and coordinate relationship between oversea company and Chinese partners.

Not like WOFE or JV, a representative office does not need registered capital and only require funds for its operation which may be remitted by its HQ.

ESTABLISHMENT PROCEDURE

If the oversea company who wants to set up a representative office in China is a financial institution, an insurance company, an air or sea transportation company, a sea transportation agent, etc, the establishment of the representative office shall acquire approval from the authority before registered at the registration authority. However, for other company like trading company, manufacturer, leasing company, etc, no prior approval is required.

Prior Approval

If according to the industry of the oversea company, prior approval is required, the applicant shall prepare and submit required documents to relevant authority for examination and approval.

After approval, the authority will issue the approval certificate which shall be used for registration for the next step.

Registration

For representative offices which may require prior approval, within 30 days after the approval certificate is issued, it shall apply for registration.

For representative office which don’t need prior approval, it can apply for registration directly.

A listing of required documents shall be prepared and submitted to the registration authority, which may include application letter, appointment letter for chief representative, bank credibility letter, leasing agreement, chief representative’s resume, pictures, passport copy etc.

A registration certificate will be issued after registration, which means the representative office has been duly established.

POST-ESTABLISHMENT FORMALITIES

After obtaining the registration certificate, the representative office should attend to a number of post-registration formalities including:

• obtaining an organization code and an organization code certificate from the General Administration of Quality Supervision, Inspection and Quarantine of the PRC or its designated local bureau;
• registration with the Public Security Bureau;
• opening of a foreign exchange account in the designated bank;
• registration with the local as well as the state tax authority; and
• registration with the local customs bureau;
• if there is a foreign employee, work visa and residence permit is needed.

TERM OF OPERATION

In most cases, the term for a representative office is three years. The term of operation of a representative office may be extended upon submission of an application to the original approval authority within 30 days before expiry of its term.

TAX

The main tax involved for a representative office shall include the business tax and income tax. When the representative office applies for tax registration in the tax authority, the tax authority will decide to adopt one way for calculating the tax for the representative office, according to the business the representative office engages. Since the representative office is not allowed to engage direct business activities, so how to decide its income is the issue the authority may consider. In Shanghai, there is one model which the authority adopts called Expense converted to Income. The calculation is as follows:

First of all, the representative office shall calculate its total expense for a certain period. The expense may include the employee’s salary, office rent, equipment cost etc.

Then the total income shall be calculated as follows:

The assumed income is equivalent to expense/0.85

The business tax shall be expense/0.85*5% (5% is the rate for business tax)

The income tax shall be expense/0.85*10%*25% (10% is the assumed profit rate and 25% is the rate for income tax)

The authority may decide to adopt other model for tax calculation after examination.

EMPLOYEMNT

A representative office can use local and foreign employee.

Since the representative office is not an independent legal entity, according to Chinese law, it is not allowed to recruit employee directly in its own name. It has to hire employee through a certified agent, like FESCO. The employment contract is signed between the employee and the certified agent and then the agent send the employee to representative office. The agent is the employer of the employee and the representative office is the actual user for these employees. The representative office shall pay service fee to the agent as well as all salaries to employee through the agent.

If the representative office needs to recruit foreign employee (chief representative and representatives excluded), these foreign employees shall apply for Z visa and work permit in China. After application of work permit, they also need to get a residence permit which may enable them to work legally in China.

Shangstar

Fire-eater

Joined: Feb 07, 2008
Posts: 2772
Location: Spitland
Status: Offline

Posted: Aug 03, 2009 - 06:23 PM

great thanks Erex

_________________
Charles Darwin: Differences between humans are differences in degree, not differences in kind

PRCwanderer

Newbie

Joined: Oct 09, 2008
Posts: 3

Status: Offline

Posted: Aug 11, 2009 - 02:41 PM

Landlord / Tenant Question

Dear Mr Chen,

Fantastic advice in this thread... My question: We (foreigner) have a 2 year lease in Xuhui in an okay development and have lived there about a month. Landlord (Shanghainese) now says they want the apartment back because daughters wedding but the market increase looks like a motivating factor .... We do not want to move and like the apartment. We intend to pay rent and stay etc. The contract says neither party can terminate the contract without the agreement of the other party. The contract provides for damages in the event of breach.

Question: How can the Landlord take back the property? It seems the only way is for them to come with the locksmith and change the locks. However, we are registered with the Gongan at that address etc.
Can they go to court to terminate the lease? Not likely ...
Can they issue a notice/ letter terminating the lease (and be liable for damages)?
Can we register the lease with the land bureau etc and would this help?
What can we do to protect ourselves? Hire a guard!

What are your rates?

Regards.

erexchen

Reacher

Joined: Aug 14, 2006
Posts: 279
Location: Shanghai
Status: Offline

Posted: Aug 11, 2009 - 08:21 PM

I believe your right in the contract is very clear and of course you can stay in this apartment until the lease term becomes expired. Your right shall not be affected by the landlord unless there is voilation of contract at your side.

If the landlord trys to change the lock, just call the police. They will help you too.

For your questions:

1. The landlord shall fulfill the obligation under the lease contract and shall not take back the property unless you agree.
2. No. They cannot terminate unilaterally, which is agreed in the contract.
3. No. Since the apartment has no problem for lease.
4. That will not help too much.

A guard may be helpful but may cost you a lot of money. If you like, you can do.

Good Luck!

PRCwanderer

Newbie

Joined: Oct 09, 2008
Posts: 3

Status: Offline

Posted: Aug 12, 2009 - 11:34 AM

Mr Chen,

Thanks for your prompt response. We'll see how it goes. Thx

n1110

Newbie

Joined: Feb 21, 2009
Posts: 1

Status: Offline

Posted: Sep 02, 2009 - 02:12 PM

Hello,
My wife and I were recently in a car accident. Were were in a taxi when a car turned from the oncoming lane into ours and hit us head on. My wife sustained serious injuries but is recovering. I will be meeting with the driver of the car at fault, the police, and an agent of my employers(who speaks mandarin) to discuss compensation. Is there an average compensation rate for expats involved in accidents such as this? Any further advice?

Thanks.

AColdwell

Newbie

Joined: Aug 26, 2009
Posts: 1
Location: Shanghai
Status: Offline

Posted: Sep 02, 2009 - 03:45 PM
Post subject: Marriage between two foreigners under Chinese law??

Good day all!
I have been trawling the forums and internet and have been unable to find the exact proceedure for two foreigners marrying under Chinese law. I am British citizen and my fiancee is South African. Does anyone know how this can be done? How quickly and whom I will need to contact.
Thanks!!

shalamazoo

Raver

Joined: May 28, 2002
Posts: 394
Location: I'm thinking???
Status: Offline

Posted: Sep 02, 2009 - 05:42 PM

Hi Erex: our Chinese company is in litigation with one of our US customer for unpaid balance, there were a few documents we submitted to the US court, our lawyer in the states require those documents to be notarize, how and where would i do that?? even though the documents are in English, but the individual who sign is local Chinese, can that be notarize??
Thanks in advance.

erexchen

Reacher

Joined: Aug 14, 2006
Posts: 279
Location: Shanghai
Status: Offline

Posted: Sep 06, 2009 - 09:40 AM

n1110 wrote:

The law on traffikc accident is complicated. Basically the following compensation items shall be considered

1. Medical expense. The medical expenses shall be determined on the basis of the vouchers issued by the hospital on medicine expenses and hospital expenses as well as in combination with medical record, the diagnose proof and other relevant evidence.

2. The loss in income due to missed working time. It shall be determined in light of the victim’s missed working time and his usual income. The missed working time shall be determined on the basis of the proof issued by the hospital where the victim is treated. If the victim misses his working time continuously due to disability caused by the injury, the missed working time may be calculated up to the day before the disability is determined. With regards his income, if the victim has fixed and regular income, his loss in income due to missed working time shall be calculated according to the income actually reduced. However, if the victim has no fixed income, his loss in income shall be calculated on the basis of his average income during the latest three years. If the victim is unable to provide evidence to prove his average income during the latest three years, his loss in income may be calculated by referring to the average salaries of the employees in the same or similar industry in the last year at the location of the court where the case is filed.

3. The nursing expenses. The nursing expenses shall be determined in light of the usual income of the nursing personnel, the number of nursing personnel and the nursing period. If the nursing personnel have any income, their income shall be calculated by referring to their loss in income due to missed working time. If the nursing personnel have no income or any nurse is employed, the said income shall be calculated by referring to the remuneration rates of the local nurses engaging in the service of the same class of nursing. There shall be only one nursing person in principle, except there is opinion from the hospital that one more nursing persons are required. The nursing period shall be calculated up to the time when the victim has recovered his capability of taking care of himself. If the victim is unable to recover due to disability, a reasonable nursing period may be determined in light of such factors as his age and health condition, provided that the period shall not exceed 20 years. If the victim needs to be nursed after determination of his disability, the nursing class shall be determined in light of the extent of his dependence on the nursing and in combination with equipment of aid for disability.

4. The traffic expenses. The traffic expenses shall be calculated on the basis of the expenses that actually occurred to the victim and his necessary accompanying carers due to medical treatment. Formal vouchers are required;

5. The board expenses. The standard for board expenses in hospital in Zhejiang province in 2008 for traffic accident is RMB 30 per day.

6. Accommodation expense. If the victim is unable to be in hospital due to special reason, the reasonable accommodation expense and board expenses occurred to the victim himself and his accompanying carers shall be compensated. The standard for accommodation expense in Zhejiang province in 2008 is RMB 150 per day.

7. The expenses for nutrition. The expense for nutrition shall be determined in light of the victim’s situation of injury or disability and with reference to opinions of the hospital.

In addition, if the victim becomes disabled due to the injury, the following items for compensation shall also be included:

1. The compensation for disability. The compensation for disability shall be calculated on the basis of the extent of the victim's inability to work or the grade of disability, in light of the per capita disposable income of the urban residents or the per capita net income of the rural residents at the locality of the case-accepting court of the last year, for a period of 20 years as of the day when the disability is determined. However, if the victim is at the age of 60 or over, the period shall be deducted by one year for each year of age added. If the victim is at the age of 75 or over, the period shall be calculated as 5 years. In Zhejiang province, the per capita disposable income of the urban residents in 2008 is RMB 22,727. The per capita net income of the rural residents in 2008 is RMB 9,258.

2. The expenses for aid for disability. The expenses for aid for disability shall be calculated in light of the reasonable expense rates of common applicable devices.

3. The living expense for person in need of maintenance and upbringing. It shall be calculated on the basis of the extent of the victim's inability to work, and in light of the per capita consumption expenditures of the urban residents (RMB 15,158 in 2008 in Zhejiang) and the per capita annual living consumption expenditures of the rural residents (RMB 7,072 in 2008 in Zhejiang) at the locality of the case-accepting court of the last year. If the person in need of maintenance and upbringing is a minor, the period shall be calculated up to the age of 18. If the person in need of maintenance and upbringing has no ability to work or no other source of income, the period shall be calculated as 20 years. However, if the victim is at the age of 60 or over, the period shall be deducted by one year for each year of age added. If the victim is at the age of 75 or over, the period shall be calculated as 5 years. A person in need of maintenance and upbringing means a minor to whom the victim is lawfully obligated for maintenance and upbringing, or an adult close relative of the victim, who has lost the ability to work and has no other source of income. If the person in need of maintenance and upbringing may be maintained and brought up by any other person, the obligor to compensation may only compensate the proportion that the victim shall bear in accordance with the law. Where there are more than one person in need of maintenance and upbringing, the accumulative annual compensation amount in total shall not exceed the amount of per capita consumption expenditures of urban residents of the last year or the amount of per capita annual living consumption expenditures of rural residents of the last year.

4. The necessary healing expenses that actually occurred for healing and nursing and continuing treatment, nursing expenses and the follow-up treatment expenses.

5. Compensation for psychological injury. The amount shall be decided by the court.

erexchen

Reacher

Joined: Aug 14, 2006
Posts: 279
Location: Shanghai
Status: Offline

Posted: Sep 06, 2009 - 09:47 AM
Post subject: Re: Marriage between two foreigners under Chinese law??

AColdwell wrote:

You can contact the Shanghai Civil Affairs Bureau and they will show you how to handle (including the required documents).

The key documents shall be the single statement which shall be notarized and legalized.

If you need assistance, please contact me!

erexchen

Reacher

Joined: Aug 14, 2006
Posts: 279
Location: Shanghai
Status: Offline

Posted: Sep 06, 2009 - 09:48 AM

shalamazoo wrote:

Please contact me erexcxl@yahoo.com.cn and I will be happy to learn more details and assist you.

lizbiggs

Newbie

Joined: Sep 10, 2009
Posts: 1

Status: Offline

Posted: Sep 10, 2009 - 05:37 PM

Hi Erex,

I am a foreign national who has just completed a year's contract for a local language school Kai En Corporate Training which is a joint venture company. At the end of the contract I opted not to renew but left them on very good terms and with over a month's warning. However the school are having a financial crisis and are cutting back on salaries to get by. My final salary has not been paid and it is six weeks since I left, neither has the airfare reimbursement which was stipulated in my contract.

Where do I stand in terms of Chinese labour laws? Is it worth my while hiring a lawyer? Apparently the company have been very tricky and the documentation they give foreigners (like our contracts in English) are not properly "chopped."

My big dilemma is whether or not it is worth pursuing legally.

Many thanks,

Liz

erexchen

Reacher

Joined: Aug 14, 2006
Posts: 279
Location: Shanghai
Status: Offline

Posted: Sep 10, 2009 - 06:29 PM

First of all, you shall make sure you have all legal papers for working in China, such as work permit and residence permit. Otherwise, you will be not qualified to file an arbitration as an employee.

Secondly, if the company is really in bad financial situation, you may consider if to file since if no money can get back, it's no meaning to file.

Thirdly, if the financial situation is confirmed and you opt not to file, it is better you can have a agreement with the company and give them some time, like 3 months to pay your salary. With this agreement, you can protect youself to some extent.

Good Luck!

MoonOverMiami
LoopKicker

Joined: Jan 07, 2008
Posts: 862

Posted: Sep 11, 2009 - 03:17 PM

Hi Erex!

A tax rebate question for you.

We just bought some electronic equipments (server, internet monitor use, telephone switchboard, etc) for office use. Most of this is mandated by our US customers so that we are in compliance with C-TPAT requirements.

My question is are we allowed to claim a tax rebate on these items, from the zhen zhi suay invoices? We are being told production equipment is ok to claim a return, but not office equipment.

Thanks!

_________________
"One who falls asleep with an itchy backside, will wake up with smelly fingers..."

MoonOverMiami
LoopKicker

Joined: Jan 07, 2008
Posts: 862

Posted: Sep 13, 2009 - 12:08 AM

Another question Erex.

Lets say a relative of a manager is using their ties to get away with stuff. For example, lets say this worker (who is a team leader) knowingly disregards his responsibilities claiming there is no work to complete, and dismissed his entire team for half a day. That dropped their total working hours to less than 40 per week, and by taking the half day off it delayed production by over one week.

And the same worker the following week takes another half day off claiming there is no work to complete, but it was obvious that there was a lot to do. This worker had already dismissed his entire team for the half day (dropping their working hours to less than 40 per week again), and when he was called back to complete the task the relative (manager) called in to request that they be given the rest of the day off. When the request was denied, only the team leader showed up to work.

Normally, employees can be reassigned if they are not performing well...and after 3 changes the employer can terminate the employee. But in this case, can we reassign the team leader (employee) to a non-supervisory position because of the delays he has caused? And its apparent he was using his relationship with the manager to slack off...what recourse does the employer have?

Thanks!

_________________
"One who falls asleep with an itchy backside, will wake up with smelly fingers..."

Shangstar

Fire-eater

Joined: Feb 07, 2008
Posts: 2772
Location: Spitland
Status: Offline

Posted: Sep 22, 2009 - 06:52 PM

Erexchen, a specific question here for you.

Q: Can foreigners lawfully rent out their apartment in China?

I read somewhere that apartments can only be bought for personal use and not for investment.

If I was for example to buy an apartment in Beijing but lived in Shanghai, could I lawfully rent the apartment out to someone in Beijing?

_________________
Charles Darwin: Differences between humans are differences in degree, not differences in kind

erexchen

Reacher

Joined: Aug 14, 2006
Posts: 279
Location: Shanghai
Status: Offline

Posted: Sep 25, 2009 - 12:40 PM

Shangstar wrote:

Yes I think you can rent it out

erexchen

Reacher

Joined: Aug 14, 2006
Posts: 279
Location: Shanghai
Status: Offline

Posted: Sep 25, 2009 - 12:45 PM

MoonOverMiami wrote:

This may be related to the company's principle. Obviously the behavior is against the company's interest. But it's best you have the staff handbook about company principle. If his behavior brings losses to the company, the company may fire him. But you need to have evidence at hand.

erexchen

Reacher

Joined: Aug 14, 2006
Posts: 279
Location: Shanghai
Status: Offline

Posted: Sep 25, 2009 - 12:51 PM

MoonOverMiami wrote:

You can email to me erexcxl@yahoo.com.cn and provide more information about this.

MoonOverMiami
LoopKicker

Joined: Jan 07, 2008
Posts: 862

Posted: Sep 25, 2009 - 04:03 PM

erexchen wrote:

You can email to me erexcxl@yahoo.com.cn and provide more information about this.

Thanks Erex, but we've figured this out. The tax bureau was only telling us that equipment purchased for production only can be considered. But the actual wording of the regulation says "Production AND Operation", and new office equipment (specially computers) fall within this category.

Seems like many businesses are not aware of the "and Operations" part.

_________________
"One who falls asleep with an itchy backside, will wake up with smelly fingers..."

maneo

LoopKicker

Joined: May 12, 2007
Posts: 849
Location: neither here nor there
Status: Offline

Posted: Sep 28, 2009 - 01:57 AM

shalamazoo wrote:

You might want to check with the US Consulate.
They do provide notary services for American citizens.
However, issue might be whether the notary can read or accept the proof of identity of the local individual.

TrueNorth

Barker

Joined: Sep 08, 2009
Posts: 136
Location: Shanghai
Status: Online!

Posted: Sep 28, 2009 - 03:15 AM

Hi erexchen,
This is a general question. Ordinary expats cannot know all the laws of China. Are there any major differences in Chinese laws and those of Canada or US we should be aware of? For example, I still don't understand the pedestrians' right in China. Even they are crossing marked crosswalks on pedestrians' green light, cars race toward you, and even the traffic police do not attempt to protect the pedestrians. Twisted Evil

During my first visit to Shanghai, in dusk I was crossing a marked crosswalk that did not have the traffic light. In the middle of the crosswalk, I saw a headlight of a motorcycle approaching me, but since I was walking on the crosswalk, I did not pay attention assuming he surely would stop to let me cross. Wrong! he narrow missed me, and before I could curse, the motorcycle turned on blue and white flash light. He was a traffic cop! Had he hit me on the crosswalk, who would be in trouble, he or I? Shocked