Business and Commerce
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C. Staff employment and taxation matters

A foreign investment enterprise (FIE) can recruit its staff in the Mainland from an authorised local employment agency. Subject to the consent of the local labour bureau, a FIE may also directly recruit its staff either from the area in which it is located or from other areas.

As employers, FIEs are required to comply with the statutory requirements for social insurance for local staff (which are mainly concerned with medical expenses, unemployment and retirement), and must support the labour union that their staff are entitled to establish in accordance with the People's Republic of China (PRC) Labour Law 《中華人民共和國勞動法》 . Employers must also deduct personal income tax and contributions to the social insurance fund from the salaries of their staff and make payments on their behalf to the PRC Government.

An FIE can hire its staff by signing labour contracts directly with individual staff members. Alternatively, the FIE may sign a collective labour contract with the labour union that represents its employees. The PRC Labour Law requires labour contracts to include provisions that govern the duration of the contract, job description, labour protection and conditions of work, remuneration, labour discipline, conditions for termination and liability for breach of contract. All individual labour contracts must be endorsed by and registered with the local labour authority.

Foreign services companies such as the Beijing Foreign Enterprise Human Resources Service Co. Ltd. (FESCO) (a state-owned corporation in China ) also provide services such as recruiting qualified Chinese employees and ensuring that policies and procedures comply with the statutory requirements regarding social insurance and welfare for staff.

  1. To which aspects of taxation should I pay attention when running a small or medium-sized business in Mainland China?