Social Insurance Law - maybe another bite out of your apple?

I am not sure of the implications of the new Social Insurance Law. While the details of its implementation are still being worked out I have a feeling that it will impact on Foreign Teachers in different ways.

Up to now I have usually not paid any tax in China. Usually that has been because my salary has been below the threshold. Sometimes it has been because the school just paid the contracted amount and solved the tax obligation without troubling me with any details.

It seems important to me that we keep up to date with each other on the implementation of this tax. Some questions that I have:

Is it going to be deducted from the salary agreed in existing contracts?

Will employers find a way to circumvent the tax requirements in the interim?

Is it grounds for renegotiating a new contract that provides compensation for the tax?

Is it a factor we should  build into any new contracts?

While the article in this link is from a month ago, and it has a focus on expats from the USA, it has some useful information for citizens of any country.

http://www.chinadaily.com.cn/usa/us/2011-06/21/content_12744298.htm

 

If you make over a certain amount you can be sure your school is paying tax or getting creative with ways to get out of it.

It is important for teachers to make sure that their salary is after tax. At my previous school I lost something like 1300rmb a month because my contract didn't specify after tax. They were a pretty "by the books" school and were not going to fudge the numbers on my behalf.

After I left that school I made sure I specified after tax salary on my other contracts. My current school handles the problem by splitting my salary into two parts. If you look at my bank statement I get two deposits from the school. There is a very large one that is classified as "reimbursement" and then another much much smaller one that is classified as "salary." Of course this is tax evasion but what the school evades and doesn't evade is up to them.

One of my major issues with paying taxes in China has always been that we foreigners get absolutely no benefits from paying our taxes in China. I don't mind taxes at all in theory. As someone who is living in China long term, I don't mind paying into the system if I can get something back for it. As far as I can tell, this is a good thing. How it will work out in practice is another issue, but I think it is high time that foreigners in China weren't just treated as vacation workers and that some provisions were made for those of us who choose to stay here long term. The article is wrong about one thing and that is that most of us are NOT paying into the social security systems in our own home countries if we're earning income here in China. I've been in China for most of my adult life and I've hardly paid anything into social security back home. If China didn't plan to provide a social security system for foreigners and I stayed here my whole life I'd be well and truly screwed in my old age. So regardless of how this effects the here and now of what we take home each month, this is overall a good move imo.

The university I work for has changed the contracts for next year.  The old contract would say something like: you will be paid 8,450rmb/month before tax and 8000 after tax.

The new contract just says you will be paid 8,450 rmb /month before tax.  Nothing about the actual take home salary.   

I think some teachers will be royally pissed of in the fall   

In addition to the new Social Insurance Law, they are adjusting the income tax rates. I'll post a new topic about that so the information can be easily found in the future. The new income tax rates take effect September 1. In fact, most people will see a reduction in income tax due, but probably not enough to offset the new social insurance tax.

Just to answer dragonsaver's post above, the tax on 8450 will go from 422.5 (the actual tax that's payable on 8450, someone at your school is pocketing the other 27.5) to 260. So they'll save 162.5 in taxes not taking into account the Social Insurance tax which, as I understand it, will vary by region and city.

OK, i've posted a new topic on the new INCOME Tax rules (as opposed to the Social Insurance Tax we are discussing here).

You can find it here:
http://raoulschinasaloon.com/index.php?topic=6566.msg123795

My current school handles the problem by splitting my salary into two parts. If you look at my bank statement I get two deposits from the school. There is a very large one that is classified as "reimbursement" and then another much much smaller one that is classified as "salary." Of course this is tax evasion but what the school evades and doesn't evade is up to them.

I was paid this way in one job, but I had to provide tax receipts for expenditure equalling the "reimbursement". If I'd saved, rather than spent, I'd have been taxed on the full salary.