Working and Living in China

Foreigners who want to work in China need to deal with lots of insurance and taxation issues. The local rules change from time to time, making it even more difficult. We aim to provide an overview for the most important things to consider. Please note that we don't accept any responsibility for the information given on this page. We try to keep it as accurate and up-to-date as possible though.

Income Tax

After deduction of social insurance fees, the employer shall withhold an employee’s individual income tax. Individual income tax is calculated according to a progressive rate ranging from 3 % - 45 % (after deduction of social insurance and 4.800 RMB as a unified tax exemption for foreigners), minus a stipulated tax deduction (Individual Income Tax = ((gross salary – social insurance) * 3-45 % )-deduction).

Social Insurance

Regulations on domestic social security for foreigners have been implemented in 2011. The employer (1) is legally bound to manage the payments to the state for social insurance. All payments into public welfare funds as well as tax payments (s. below) are automatically deducted from an employee’s gross salary. 

Despite of health insurance, further categories included into the Mainland Chinese social security system are: Pension Fund, unemployment fund, fund for work-related injuries, and maternity. The precise percentages to be paid by employers and employees are stipulated by the municipalities. Taking Beijing and Shanghai as an example, the rates are:

  

Pension
Unemployment
Medical
Work-related Injury
Employer
Employee
Employer
Employee
Employer
Employee
Employer
Employee
20.00%
8.00%
1.00%
0.20%
10.00%
2%+3
0.80%
Min. 0.30%
(depending on sector)

  

Pension
Unemployment
Medical
Work-related Injury
Employer
Employee
Employer
Employee
Employer
Employee
Employer
Employee
22.00%
8.00%
3.00%
1.00%
12.00%
2%
0.50%
0.50%

 

In average, an employer pays about 30 % of additional labour cost to the social security funds while and employee ends up paying a rate of about 10 %. 

Whereas local laws have stipulated the payment for the funds, it still is (as of September 2012) unclear how foreigners can benefit from the social security system. Procedures can be tricky for foreigners to apply to, as they are not always able to provide all documents needed for certain benefits (e.g. birth allowance certificate for maternity). Especially when foreigners end their work and leave China, it is not clearly regulated how benefits from the funds can be rewarded or, if they remain unused, repaid. It should theoretically be possible to receive payment from pension funds abroad although it has rarely been tested. Unused rates (e.g. health and pension) paid by the employer are meant to stay in the public funds and are in fact lost. Rates paid by an employee are collected on separate accounts and shall be remitted when someone decides to depart from Mainland China. The procedure for it is not yet standardised. 

Another unsolved issue is related to visa policies: upon end of employment, a foreigner is no more legally entitled to remain on Chinese grounds other than as a tourist. The contradiction of being entitled to financial support from the unemployment fund but no more able to stay in China has not been solved yet. 

(1) Or, as foreign invested companies mostly have to outsource their staff administration to HR agencies certified by the state (e.g. FESCO): the HR service agency

 

 

Health Insurance

Although all foreigners who are legally employed in China are incorporated into the public social welfare funds since October 2011, it is recommended to buy a private health insurance valid during your stay in China. Local standards of hospitals and medical treatment are rising, especially along the East Coast and even more so in cities like Beijing and Shanghai. However, depending on each individual’s Chinese language skills and the severity of a potential illness, you might want to choose a treatment in a private and/or international (e.g. SOS, Family United, doctors affiliated with your embassy) medical facility, or even have the option of repatriation for a medical treatment. A private health insurance usually grants treatment in a private hospital of your own choice and is available in any price range. Experts for insurances should be able to advice when it comes to choosing a suitable health insurance. 

The local Chinese health insurance is paid by employers (depending on a municipality’s regulation, e.g. in Beijing: 10 %, in Shanghai: 12 % [as of August 2012, precise rate may vary according to local regulation. ]) and employees (depending on a municipality’s regulation, e.g. in Beijing: 2 % + 3 RMB, in Shanghai: 2 %) based on a standardised base salary (see below: Social Insurance). Public health insurance entitles an employee to regular health checks and a range of needed treatments in public hospitals.

Visa

Foreigners seeking employment (internship or work contract) in China are required to obtain a visa that entitles a person to legally enter, stay, and exit the country for work purposes. The visa section of the Chinese embassy or consulate closest to your residence is usually the relevant authority for your application. (Tourist visa cannot be changed into work/business visa domestically, which means that you have to enter Mainland China on a valid work or business visa in the first place!)

Internship: 
Interns can apply for a so-called F-Visa (Business Visa).  Application requirements and granted length may vary depending on individual circumstances. In general, an F-Visa is issued for 30 days, 3, or 6 (in some cases even 12) months, in accordance with your occupation. Needed documents usually include:

  • Valid passport with at least 6 more months of validity;
  • Signed application form (can be downloaded or collected from your corresponding visa section), including a 2-inch photograph of yours;
  • And an invitation letter from your future employer (including the following details: name, gender, and date of birth of the invited person; purpose and location of your stay; a statement how travel expenses are going to be covered; address, contact details, and stamp of the inviting company; how the invited person and inviting institution are related to each other).


Work Visa:
Foreigners, who have entered a work contract with a company or institution established in China, are required to enter Mainland China on a work visa (Z-visa).

  • The employer first has to apply for an employment permit with the Ministry of Labour (or, e.g. in the public sector, other relevant authority) in China;
  • Employer applies for an invitation letter for the new employee issued by the Municipal Bureau of Commerce;
  • Employee applies for a Z-visa from abroad with that same invitation letter (as for other needed documents: s. above);
  • Upon arrival in China, the actual work permit can be obtained from the Ministry of Labour;
  • Followed by the employee’s application for a residence permit (to be renewed every 12 months) at the local Entry-Exit Office (has to be completed within 30 days upon arrival in China) and registration at the local police administration.


On any kind of visa, foreigners are obliged to register with the local police administration within 24 hours upon arrival in China (automatically done by hotels). For any continuous stay lasting longer than 6 months, a health check has to be done in line with the standards set by the authorities. 

Further information can be found on the websites of Chinese visa sections, e.g.
www.china-botschaft.de (German)

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