Chinese Working Calendar 2021

The General Office of the State Council has recently issued the Circular no. 27 (2020) about the arrangement of the Public Holidays in 2021 in the People’s Republic of China.

There are seven legal public holidays, according to the schedule, which are:

  • New Year, falling on January 1st, 2021;
  • Spring Festival, also known as Chinese New Year, is one of the longest public holidays in China. 2021 will be the year of the Ox, and the New Year Day will fall on Feburary 12th, 2021. The Spring Festival 2021 will be a 7-day long holiday from Feburary 11th to Feburary 17th and will be preceeded and followed by two makeup days, on Feburary 7th and February 20th;
  • Qingming Festival (knowns as Tomb Sweeping Festival) will be a 3-day holiday from April 3rd to April 5th;
  • Labour Day, as the International Worker’s Day, falls on May 1st, 2021, and will be followed by an additional four days up to May 5th. Workers and employees will be back to work on May 6th, but will also have two make up days on April 25th and May 8th, 2021;
  • Dragon Boat Festival, a 3-day holiday from June 12th to June 14th, 2021;
  • Mid-Autumn Festival, a 3 day holiday from Sep 19th to Sep 21st.
  • National Day and the Golden Week, is a 7-day long holiday, from October 1st to October 7th. With a make up day on October 9th.

Please note that for any employee working during an official public holiday, the employer shall grant no less than 300% of the normal wage that would be paid

Saving for your Retirement as an Irish Expat in China

retirement-savings-options-for-expats-in-asia

Saving for retirement is key for all of us with life expectancy increasing, state pension provision shrinking and the responsibility for having enough to live out our golden years in comfort now being placed squarely on our own shoulders.

The retirement savings options for Irish expatriates are naturally different than the options for Irish residents. If you are tax resident in Ireland (sometimes referred to as onshore) you can usually benefit from tax relief on contributions into approved pension and retirement funds, however this option is not available to many expats, particularly those living in China.

If you live offshore, which simply means that you have expatriated to a foreign country and are currently tax resident in China for instance, it is nevertheless crucial to save for retirement while you are working abroad, particularly as many expats living in China find themselves with increased disposable income, an enviable situation which provides the perfect opportunity to boost their nest eggs.

Fortunately, there are some great savings options for retirement available to expats in China. I hesitate to use the term ‘offshore’ as this can have negative connotations and is off-putting for some people but offshore investing simply means that the investment is held in an international jurisdiction other than your country of residence for tax planning purposes. These vehicles are perfectly legal and cater specifically to an international expatriate clientèle.

The good news is that they also offer many advantages. Let’s take a look at the main ones.

Nine advantages of the international investment vehicles available to Irish Expats in China

  1. Accessibility

The investments within this kind of fund are more accessible than your typical pension in Ireland, which usually ties in your money until you reach the age of 55 at least. Your retirement savings will grow in tax-optimised funds which you can access at any time up to your chosen retirement date (subject to policy/fund conditions).

  1. You maintain control

You take control and decide, in consultation with your financial adviser, where every single penny of your cash is invested. As an expat living in China you have low-cost access to an enormous range of investment funds designed for expatriates and the flexibility to adjust your portfolio to meet your changing requirements at any time.

  1. Currency flexibility

These retirement saving vehicles offer the opportunity to save in different currencies. This can be especially useful if you live in a jurisdiction where the currency is volatile or if you are planning on retiring to a different country.

  1. Perfect for expats who move around

These funds are great for nomadic expats who may move country several times over the course of their time abroad. Investors are able to both contribute and withdraw wherever in the world they are based.

  1. Freedom of choice

You build and create the retirement that you would like by setting your own monthly savings amount and your retirement date rather than being dictated to by a government or pension provider.

  1. Continuity of your financial planning

An offshore retirement fund offers the ability to invest and stay invested in the markets even if your tenure overseas is short, and this will help you to remove any gaps in saving for your retirement. The removal of these gaps is quite important because, as many expats discover, an initial overseas posting of three years often turns into ten and none of us can afford to miss ten years of saving towards retirement, in fact, to do so can be catastrophic.

  1. No drawdown restrictions

You can take as much or as little of your retirement fund as you wish and can even opt to take your entire retirement fund in cash instead of being restricted to 25% of the fund.

  1. Annuity not required

Once you reach retirement age, you will have several options with a fund of this kind. You could leave the money invested, cash it in or take out an annuity but the important thing is that the choice is yours. You will not be forced to purchase an annuity, as is the case with certain pension providers.

  1. Transferability

When you eventually die, the residual fund can pass to your wife or family according to your wishes.

Why do we procrastinate over our financial decisions?

You know deep down that you should be getting to grips with budgeting, saving regularly and investing for your retirement but you’re not. And you’re not alone.

But why?

It is difficult to think about the future when we live in an insanely fast modern world where we’re frantically pedalling to keep afloat in the here and now. We are so caught up in today’s problems that we don’t have time to think about tomorrow. And I get it. When you’re struggling to get through today, long term thinking inevitably takes a back seat.

But is that the only reason we aren’t saving? I know from personal experience that it can’t be. I come across many high-earning expats in Shanghai who are more than comfortable financially living the high life with money and time to spare, and yet they still aren’t doing anything sensible with their disposable income to secure their future finances. It got me thinking that there must be a psychological explanation for why we don’t save.

So I was interested to come across an article about new research which suggests that our perception of financial planning as cold, mechanical and lacking emotion has a lot to do with why we put off tackling even the most basic financial decisions. We’ve all seen the films like The Wolf of Wall Street which stereotype money men as cold, calculating, ruthless and lacking in remorse. Who wants to be like them?

Unsurprisingly, this perception spills over into real life and people who consider themselves to be emotionally led tend to feel that they don’t have that cold and analytical side to their personality, ergo finances are simply not for them. Maybe that’s because we are constantly hearing that we should keep our emotions out of financial matters and rule with our heads rather than our hearts. But is it time to question that? Adding a little bit more emotion into the financial planning process can really help change people’s attitudes to tackling financial decision-making. People take their financial planning seriously when they picture their dream retirement – whether it’s travelling the world or spending time with the grandkids. It’s a more positive way of looking at it than pages and pages of accounts that scream “No savings”.

At the end of the day, life’s going to be a lot tougher than it is now when you are knocking on 70’s door, unable to work and with no retirement savings to get you through the next decade(s). This can be avoided – IF you stop procrastinating and start taking your financial planning seriously now.

But just how do you carve out the time to prioritise financial planning? There are lots of different ways but I like to use the process from Stephen Covey’s excellent book, The 7 Habits of Highly Successful People. If you haven’t already read it, I highly recommend that you do. It was published 30 years ago in 1989 but its principles still hold true three decades on, in particular the time management matrix, which divides tasks up into four quadrants.

Covey’s theory is that most of us spend time doing things in quadrants I and III because they are urgent and require immediate attention. However, quadrant II is the one we should be spending most time on.

It is here that you will find tasks that are not urgent but are vitally important – like strategic planning, relationship building, education, exercise and yes, financial planning. They are the fundamentals of life that we know we need to do but shove down to the bottom of our lists because they don’t feel urgent.

Our 24 precious hours each day get taken up doing the activities on the left but we need to shift the balance to spend the majority of our time doing those on the right. While you are allowed a little time for quadrant IV to catch up on social media and Netflix, your challenge is to focus on quadrant II – thinking ahead, planning strategically and sorting things out in a calm and clear-headed way before they turn into crises, jump into quadrant I and become huge, time-consuming problems.

You can relate this to many aspects of life from marriage to exercise, but I’m urging you to specifically use it to prioritise your finances. You might be able to kick the retirement can down the road for a while but eventually it will become an issue – the longer you leave it, the more likely it is to dominate your life. Doing something about it now can ensure that 70 year-old you doesn’t have to decide between heating or eating!

Of course, it’s always easier to tackle tough things with someone on your side, which is why you might want to consider a professional financial planner. A good one really will save you time and money and ensure that you don’t make foolish and costly decisions. If you’d like to get in touch with me directly I am more than willing to share a very useful financial goal setting tool many of my clients have felt was beneficial to their personal circumstances, so feel free to get in touch today.

50 / 30 / 20 Budgeting Rule

Do you have trouble budgeting? Try the 50/30/20 rule!

I know from speaking to my clients that budgeting is something that many people find extremely difficult. Like life, managing your finances is all about balance. After you’ve met all your bills, you have to decide how to use your disposable income. If you’re finding deciding how much of your hard-earned cash you should dedicate to the pursuit of pleasure and how much you should squirrel away to secure your financial future, the 50/30/20 rule is a simple way to look at the dilemma.

The 50/30/20 approach to managing finances is usually credited to Senator Elizabeth Warren, a woman who knows a bit about finance, having specialised in bankruptcy law. It is very simple you calculate the income you have left after tax and you allocate it as follows:

50% to needs

30% to wants

20% to savings

Let’s take a closer look at these different categories.

Needs – spend 50% of your income on these

No, we’re not talking a night on the cocktails at Bar Rouge , your morning Starbucks or even your Netflix subscription! Needs are those things that are essential for your survival – accommodation costs (rent or mortgage), food, transport to work, insurance, healthcare and utility bills. If you have debts, the minimum debt repayments also count as a need.

You should be able to cover all of these costs with 50% of your post-tax income. If you can’t, you need to look at areas of your life where you can cut back. Ideas include downsizing to a smaller home, switching utilities provider, buying less expensive brands of clothes/food and consolidating debt to reduce minimum payments.

Wants – spend 30% of your income on these

Wants are things that enhance your life but that you could live without. They include meals out and nights on the town, concerts and sporting events, gym membership, weekends away and holidays, the latest gadgetry, designer trainers/handbags/suits etc. If it’s not essential to your survival, it’s a want, not a need.

Wants are also upgrades to a level above that which you really require. While you need to eat, but you don’t have to shop at most expensive grocery stores. The food from a less expensive grocery store will sustain you just as well. You might need a car, but a Mercedes S-class is not a necessity. A Nissan will get you from A to B just as effectively.

Savings – dedicate 20% of your net income to this (at least!)

The remaining one fifth of your income should be channelled into savings and investments. If you have debts, the first thing to do with this savings element is to start paying off the principle (rather that simply meeting the minimum payments which are classed as needs) until you get them cleared.

If you’re debt-free, concentrate first on accumulating an emergency fund in a savings account. This should correspond to six months of essential expenditure (equivalent to your needs as outlined above) and is money to get you through costly unforeseen events such as being made redundant or unexpected medical bills. Once that is done – happy days! – you can start to build your wealth by investing for your retirement and any other financial goals you may have.

If you do have trouble budgeting, the chances are that you will be unsure about the best way to invest your savings. It really is worth taking professional advice over that. A financial adviser will help you clarify your financial goals and put together a retirement savings plan to guarantee you a comfortable life when you stop working, even if that seems like a remote prospect right now. Once that is sorted, you can treat yourself to that S-class!

Feel free to contact me if you need assistance to get your financial planning sorted, whatever stage you are at in the process, if you do get in touch I have a bespoke budgeting tool I built that many of my clients have found super helpful, so feel free to get in touch.


Is using a VPN allowed ?

There have been a number of cases on Chinese social media recently recounting instances of administrative fines being imposed on individuals who through one means or another bypassed the great firewall, which is a violation of Article 4 and Article 10 of the Provisional Rule for International Connection of Computer Networks (the “Interconnection Rule”). These rules prohibit the establishment and use of illegal communication channels (shadowsocks/VPNs/TOR/Garlic Routing … etc).

Many Irish expatriates and/or companies maybe concerned that they could face administrative penalties related to their own practices in bypassing the firewall. As China is increasing its control over their digital dominion the legal risks associated with circumventing the firewall are naturally increasing.

Although the majority of us should not worry too much, the use of VPNs for the connection to servers outside of China while illegal is very rarely prosecuted, regardless it is advisable to adopt a number of technical measures and/or managerial measures to mitigate the risks of using a VPN.

Legal obligations under the Interconnection Rule


The Interconnection Rule imposes the following two obligations on international connections between computer networks.

(1) The connections to overseas networks must go through an exit channel permitted by the Chinese authorities; and

(2) The connection to internet must go through an access network again permitted by the Chinese authorities.

Of these obligations, the first is satisfied by using a Chinese internet provider, typically if a connection is provided by one of the major suppliers, (Telecom, Unicom, Mobile) the international connection will go through an exit point permitted (“monitored”) by the Chinese authorities government. (This also explains why despite the fact many of us in China will have gigabyte broadband, our speeds to international serves will be throttled.) Corporate VPNs which many multinational companies lease for their Chinese entities are also connected through the exit points permitted by the Chinese authorities.
The second obligation is the prohibition of bypassing the great firewall. This obligation demands that a connection to internet must go through an ISP recognized by the China government and via an access network operated by it. This is so that the ISP is able to block access to prohibited websites on the government’s blacklist/smartfilter. Thus, access to the internet through an access network outside of China is a violation of this obligation.

Consequences of non-compliance

Typically, the public security bureaus(police) take a serious approach towards bypassing the firewall, and have been progressively more emboldened with enforcing the legislation. On the other hand, the industrial and telecommunication bureaus (administrative bodies) have taken a more relaxed attitude towards circumvention of the firewall.

The administrative bodies are guided by the Notice on Further Regulations on Internet Data Center Business and Internet Service Provision Business (2012), and the Notice on Clearance on Internet Network Access Service Market (2017), which states that their prime focus is to prevent the illegal operations of internet access businesses. These notices do not prohibit individuals or companies from using VPNs for their own business and private purposes.

However, from the police’s perspective, the use of VPNs to bypass of the firewall, the matter has been taken more seriously in recent years. Typically, they will charge the accused with either: (a) the illegal operation of VPNs, or (b) the provision of programs and tools to facilitate intruding into or taking illegal control over computer systems. The second charge is more frequently levied against VPN companies who collect and make use of the data to which they are privy to. It is crucial to know that many free VNP providers will make use or sell your data which is not anonymised.


Practical issues for Irish companies

Many companies for data security reasons will integrate their IT systems to their global networks by connecting their local servers to their regional or global servers. This will typically happen in the manner in the below diagram.

There are many other reasons to do so other than data privacy: companies may wish to (a) to share information and resources internally; (b) to connect to their private cloud; (c) to mitigate lag when connecting to overseas websites or video conferences; and (d) to allow China based personnel to visit commercial resources which may be blocked by the firewall. Unfortunately, this structure does not satisfy the requirements under the Interconnection Rule as it enables China-based personnel to connect to the internet through access networks outside of China. However, enforcement of the rules on this structure occurs very rarely, and is unlikely to be of issue for any private enterprises.

Although to date, no multinationals have been penalised for the above structure, taking into consideration the recent promulgation of the Cybersecurity Law and the upcoming Data Protection law, it is clear that China is seeking to strengthen cyber security legal regime. As such it is advisable that Irish companies take some measures to mitigate their liabilities and provide a reasonable defence should the authorities find issue with their behaviour.  Such measures could include:

(a) Build multi internet connections for domestic employees and expatriate employees:  with respect to domestic employees, companies should block the internet connecting functions through its servers outside of China, and provide a separate connection to internet through a domestic access network.

(b) Apply a comparable to the Chinese banned website list companywide firewall and only provide access only to websites which are necessary for the business. This may have the side benefit of improving employee productivity.

(c) Establish internal management systems, prepare IT usage manuals and to provide routine trainings, which require that employees only use the networks in compliance with the PRC law and keep network operational logs according to the Cyber Security Law. This will provide a defence to vicarious liability, should an employee misuses VPN or the overseas connection to internet, the company will have a defence by showing that the company rules expressly prohibit such behaviour.

Practical Issues for Irish expatriates

As it stands, using a VPN and circumventing the great firewall is illegal, the same standards apply to individuals as they do to companies. Enforcement is spotty, and unlikely to ever pose an issue, unless the police wish to get you on another charge. The golden rule for rule breaking is that you only break one rule at a time, charges levied against an individual for VPN usage will likely be an ancillary charge to a different crime. Of course, if you are traveling to the far west of china or other autonomous regions, it is advisable that you temporarily remove your VPN from your devices, if you wish to be cautious.

Tips for purchasing PPE from China

As there seems to be a resurgence or second wave upon the horizon in Ireland some enterprises or entrepreneurs may consider importing personal protective equipment (PPE) from China. Although the market for PPE has stabilised there still remains some issues and considerations which must be considered when purchasing PPE from China.  In this post, I have put together some tips which I hope will help ensure a safe and legally procurement of personal protective equipment from China.

European market standards

Personal protective equipment includes a wide array of medical gear.

Ranging from

· Medical Protective Clothing (e.g., surgical gowns, isolation gowns, and coveralls)

· Surgical Masks

· Disposable Face Masks

· Face-shields

Each of the above products fall under different classes which come with different regulatory requirements. It is essential that the importer checks and confirms the CE requirements. As the importer, the liabilities within Europe will fall upon you.

Finding Qualified PPE Manufacturers

Due to new regulations issued by the Chinese customs authorities related to personal protective equipment, you must make sure that the manufacturing company you are considering buying from is permitted by the Chinese Government to export PPE.

You must ensure that the exporting party has all the necessary permits and licenses in China as well as prior examination by a European Notified Body. These permits and licenses shall include:

· Medical Device Manufacturing Enterprise License (MD License) issued by the State Food and Drug Administration (SFDA)

· Medical Device Products Registration Certificate from the SFDA for every product to be sourced

· Food and Drug Administration (FDA) Verification of the Exportation Destination Country

· Export License

· Export Health and Quarantine Permit (EHQP) issued by the SFDA

. Plant & Product examination and certification by a Notified body from Europe

The reality of the personal protective equipment manufacturing industry in China is that very few small manufacturing companies are actually capable or qualified to handle bulk purchases. Orders are often delegated to subcontractors and it is the purchasers obligation to ensure that the subcontractor who will be working on your orders is legally authorized to manufacture and export PPEs.

Conduct Your Own Factory Audit

An unfortunately common issue is that some unscrupulous PPE suppliers are using questionable methods to acquire their export permits or even using “borrowed” permits to export medical equipment manufactured in sub-standard facilities. The Chinese authorities are doing their best to eliminate such practices, however a few manufacturers are bound to slip through the cracks. Therefore to mitigate risk, it is advisable to contract a private company to carry out a factory audit to ensure that the facilities and plants where the protective equipment is manufactured comply with the quality standards and have previously been audited by a EU notified body.  It is crucial to always confirm the veracity of any reports which the manufacturer shows you.

Sample Inspection Before Shipment

While licenses and permits will indicate whether the manufacturer can produce high-quality personal protection equipment, you are still responsible for making sure that your particular order complies with quality standards and as the importer you will bear all liability in Europe should the products fail to have the correct certification. It is vital to employ a professional third-party independent quality assurance/control company in China to inspect the protective gear against the required standard during production, upon completion of the order and before delivery.

Dispute Resolution

Contrary to what may be believed, it is highly recommend that you choose a local court, where the supplier is located as the court which will have jurisdiction over the case. An important facet of dispute resolution is to always choose the jurisdiction where the other party has assets, this ensures ease of recovery following a favourable judgement. While an Irish court maybe cheaper and easier to take a case in, enforcing a judgement from Ireland on a defendant in China will be next to impossible.  

Your rights as a foreign employee in China

Generally speaking as an expatriate you are entitled to the exact same rights and provisions as your Chinese counterparts under the Labour Contract Law of the People’s Republic of China. However there are a couple of caveats which are important to consider which shall be covered below.

The general aspects governed by Chinese employment law are employment contracts, remuneration, workplace safety, procedures for negotiations, labor disputes, working hours, protection from discrimination, compensation or wage regulations, training, social insurance, and other legal responsibilities the employer must follow according to law.

China employment law is deemed to have the following characteristics:

  • a very strict termination system;
  • the existence of local policies and rules, in addition to the national laws, which differ in the approach to the same issues; and,
  • a varying court and arbitral tribunal interpretations of the same legal issues. (important)

The two employment people should familiarise themselves with are as follows:

  • Labour Law of the People’s Republic of China; and,
  • Labour Contract Law of the People’s Republic of China.

These are the two primary sources of China’s employment law. However, these are not the only ones that should be considered since there are several other China employment law and supplementing policies applicable to any business in the country, including the following:

  • Law of the People’s Republic of China on Labour Dispute Mediation and Arbitration;
  • Employment Promotion Law of the People’s Republic of China;
  • Labour Union Law of the People’s Republic of China;
  • Law of the People’s Republic of China on Work Safety;
  • Social Security Law;
  • Opinion on Several Questions Regarding the Implementation of the Labour Law of the People’s Republic of China; and,
  • Implementing Regulations for the Law of the People’s Republic of China on Employment Contracts.

There are three types of employment contracts, which are as follows:

  • fixed-term labor contracts;
  • open-term labor contracts; (somewhat limited by immigration requirements)
  • specific-task labor contract, which set the completion of specific tasks as the term to end the contract.

There are no “employment at will” policies in China and as such companies may not terminate an employee without due cause. However, the company can force an employee out by paying at least double the severance entitlements.

Severance in China is calculated at 1 month for every year worked, for periods of less than 6 months, you are entitled to 1/2 a month salary compensation. However there is a VERY IMPORTANT CAVEAT here, in Shanghai the people’s courts reasoned that an foreign employee is only entitled to severance payments which are specified in the labour contract, ergo if there is no mention to severance in the termination section of the labour contract, the courts will find that you are not entitled to anything, so it is important to insist upon either a specific formula or figure for severance after termination.

Other entitlements in China

These entitlements rarely pose issues in China as expatriate contracts ususally offer above the minimum.

Annual Leave

Annual leave is a paid benefit in China, and is required if an employee has worked more than one year cumulatively for all employers (not just the current employer).  For cumulative employment of 1-10 years there is five days of annual leave, and twice that amount for service of 10-20 years.

Public holidays are in addition to the Annual leave entitlements.

Sick Leave

The minimum sick leave entitlement in China is three months (for employees with less than 10 years cumulative work experience).  Sick leave is paid on a schedule that depends on the number of years of work, ranging from 60% to 100% of salary.

Working Hours

There are three types of working hours systems applicable to full-time employees:

  • Standard working hours system.
  • Comprehensively calculated working hours system.
  • Flexible working hours system.

Under the standard working hours system, an employee should work no more than eight hours per day and 40 hours per week. The employee is entitled to at least one rest day every week. If the employee is required to work over the above limits, they will be entitled to overtime pay to be calculated as follows:

  • For overtime worked on a working day, the employee is entitled to 150% of their normal salary for the overtime worked.
  • For overtime worked on a rest day (normally Saturday and Sunday), the employee is entitled to alternative rest time, or 200% of their normal salary for the overtime worked if the alternative rest time cannot be arranged by the employer.
  • For overtime worked on a public holiday, the employee is entitled to 300% of their normal salary for the overtime worked.

Under the comprehensively calculated working hours system, working hours are calculated within a certain calculation period (for example, a month, a quarter or a year). The average daily working hours and the average weekly working hours must not exceed the statutory maximum (no more than eight hours a day and no more than 40 hours a week). The comprehensively calculated working hours system is generally applicable to certain special industries requiring long shifts (for example, employees in transportation, airlines, fishery industry, offshore oil exploration and so on). The employees working under this working hours system usually work intensively for one period and then take continuous days of rest. The employer must obtain approval from the competent authorities before adopting the comprehensively calculated working hours system.Under the flexible working hours system, an employee can perform their duties on a flexible schedule, provided that they properly complete the work assignment in a timely manner. The flexible working hours system is only applicable to certain job positions (for example, executives, sales personnel, taxi drivers and so on). Similarly, the employer must obtain approval from the competent authorities before adopting the flexible working hours system.

Maternity rights
Women are entitled to maternity leave of 98 days (which includes 15 days of antenatal leave). Female employees who have more than one baby in a single pregnancy will be granted an extra 15 days’ maternity leave for each additional baby born.
For one year after the child is born, the female employee is given a one-hour break each day for breastfeeding. Female employees who bear more than one baby in a single birth are granted an extra one-hour break for each additional baby born.
During the pregnancy, maternity and breastfeeding period, the female employee’s salary must not be changed by the employer. Additionally, the employer cannot unilaterally terminate her employment during these periods, unless one of the circumstances provided in Article 39 of the PRC Employment Contract Law applies .
Paternity rights
Some local regulations provide that the father of a newly born child can enjoy a certain number of paid days’ leave. There is no national provision covering paternity rights.

Continuity of employment following the sale of company
In the event of a company merger or division, the employees’ existing employment contracts remain valid and will continue to be performed by the succeeding employer, who takes on the rights and obligations of the previous employer. The employees are therefore automatically transferred to the new employer after the merger or division.
If the business transfer only involves a share transfer, the employer and employees remain the same and there is no automatic transfer of employees.
Protection against dismissal
Generally, on a business transfer (for example, a merger, division or share transfer) the employees are protected against dismissal.
However, a business transfer other than a merger, division or share transfer (for example, an asset transfer or a sale of a business division) can lead to a major change to the objective circumstances under which the employment contract was executed, rendering the employment contract unenforceable. In that instance, if, after consultations, the employer and the employees are unable to agree on amending the employment contract, the employer can unilaterally terminate the employees by giving 30 days’ prior written notice, or one-month pay in lieu of notice. In that case, the terminated employees are entitled to statutory severance pay.
Harmonisation of employment terms
The new employer and the transferred employees can negotiate between themselves on harmonising the terms of employment with that of the new employer’s existing employees.

Arbitration in China

Arbitration clauses and agreements are widely used by foreign companies when conducting business in China. These clauses and agreements usually state that disputes should be resolved between parties by friendly negotiation and if failing to come to an accord, the parties should refer the dispute to an arbitration centre.

Arbitration in China is governed by the “Arbitration Law of the People’s Republic of China (Revised 2017)”. The key points of note in the Arbitration Law is that the arbitration clause must be in writing, must be sole method of dispute resolution (there can be no choice between litigation and arbitration) and contain the following:  

        i.           an indication of the intention to apply for arbitration;

      ii.           the subjects to be arbitrated; and

    iii.           A specified arbitration centre.

It is crucial that when drafting the arbitration clause that the arbitration commission is clearly stated. If the agreement fails to specify the arbitration commission or the commission is improperly named (to the extent that there could a misunderstanding between the parties) the parties to the agreement must have supplementary documents/agreements which clarify the matter, if not any arbitration decision is likely to be disputed, and taken to litigation where the Chinese courts will resolve the dispute while voiding the arbitration agreement.

Other points to specify when drafting an arbitration clause/agreement;

        i. the language to be used during the arbitration,

       ii. the number of arbitrators,

     iii. the nationality of the presiding arbitrator.

Parties can choose the language to be used during the arbitration, however if left unspecified, the arbitration language will be Chinese. Likewise, if the parties do not specify the nationality of the presiding arbitrator, they will be nominated by the arbitration centre and will more than likely be Chinese.

For contracts with a foreign element it is possible to choose an arbitration centre outside of China, however it may prove quite difficult to persuade the Chinese party to agree to this. Furthermore, it is important to note that the arbitration should take place in the jurisdiction of one of the parties, as a challenge to the arbitral court’s jurisdiction is likely to be raised and subsequently upheld if a party disputes the choice of arbitration centre through litigation.

Within China there is no shortage of possible arbitration centres, with over 200 empowered to adjudicate cases involving foreign elements, it is important to choose the right centre for the peculiarities of the contract to be governed. The largest and most recognised centres are CIETAC, SHAIC, SCIA and BAC which cover the usual topics of dispute such as corporate law, foreign investment, M&A, IP, finance, and securities. However, if a contract is within a specific industry and disputes are likely to arise within niche aspect it maybe more prudent for the parties to choose a specialised arbitration centre such as the China Maritime Arbitration Commission, International Aviation Court of Arbitration or the Shanghai Intellectual Property Court of Arbitration for example.

Below is a brief introduction of the two most popular arbitration centres for foreign firms operating in Shanghai.

SHIAC

First establish in 1988, the Shanghai International Economic and Trade Arbitration Commission (SHIAC) is located in Shanghai.

The types of disputes include, but not limit to, trade, investment, transfer of technology, M&A, finance, securities, insurance, real estate, construction, logistics, intellectual property, franchising, energy, environment interest, information technology.

Parties from more than 70 countries and regions have participated in arbitration proceedings administered by SHIAC. The awards of SHIAC have been recognized and enforced in nearly 50 countries and regions. The Panel of Arbitrators of SHIAC is constituted by 965 arbitrators. All the arbitrators come from 74 countries and regions around the world. 604 arbitrators which take 62.59% are from Mainland China, while 361 which take the rest 37.41% are from Hong Kong SAR, Macau SAR, Taiwan region and foreign countries.

CIETAC

First established as the Foreign Trade Arbitration Commission of the China Council for the Promotion of International Trade in 1956, and later renamed in in 2000 to the Court of Arbitration of the China Chamber of International Commerce.  CIETAC is headquartered in Beijing, with offices in various provinces in Mainland China and also in Hong Kong.

The parties may choose the place of arbitration and specify such in their arbitration agreement. If the arbitration agreement does not specify the place of arbitration, CIETAC will decide for the parties.

Although Mandarin is the official language of CIETAC, if the parties have agreed to use a different language, their agreement to such will prevail.

Appointment of Arbitrators

Arbitration will usually consist of three arbitrators (two party appointed arbitrators and one presiding arbitrator) unless the parties state in the arbitration clause/agreement that a sole arbitrator should be appointed. Each party should appoint an arbitrator or authorise the arbitration centre to appoint arbitrators on their behalf within 15 days of receiving the Notice of Arbitration. If the parties have agreed to appoint outside arbitrators, the arbitrators appointed or nominated may serve as co-arbitrator, presiding arbitrator or sole arbitrator, subject to the confirmation of the arbitration centre.

Procedures for Arbitration

After exchanging claims and the appointment of arbitrators, the centre will pick a hearing date. It is possible for the arbitration to be undertaken on a document only review and forgoing the hearing, this only applies when approved by both parties and by the centre.  In some cases, the parties may elect to conduct the proceedings on a documents-only basis and dispense with a hearing. This can be done with the agreement of both parties and the tribunal; however, this process is generally only undertaken when there is not a substantial dispute between the parties.

If a hearing is held the arbitrators will make an award after reaching a decision, if the arbitrators can not come to a unanimous decision, a simple majority will rule. Each centre will have its own rules by which time an award must be delivered; delays are common especially if an arbitrator from a different jurisdiction is chosen. Once the award is granted by the arbitrators, the centre will review and approve at which time the award becomes legally binding.

Enforcement of the Arbitration Award

Arbitration centres do not have the power to enforce awards in China, if the losing party defaults on their obligations to honour the award, the wronged party may apply to the Intermediate People’s Court at the location where the defaulting party is headquartered.  If the defaulting party is a foreign entity the wronged party can apply to the competent foreign court for enforcement of the award if the other party is resident in a jurisdiction which is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. 

Irish Contacts & Community in China

Irish Citizens seeking emergency consular assistance should contact the main Embassy number, 01085316200, and leave a message with your name, contact number and details of the emergency on the Duty Officer voice mailbox. This mailbox will be monitored regularly.

Irish Embassy Beijing

3 Ritan East Road
Beijing 100600
China

Tel.: +86 10 85316200

Irish Consulate Shanghai

Suite 700A (West Tower)
Shanghai Centre
1376 Nanjing Road West
Shanghai 200040
People’s Republic of China

Tel.: 00 86 21 6010 1360

Irish Consulate Hong Kong

20/F, 33 Des Voeux Road,
Central,
Hong KongTel.: (+852) 2535 0700

Community Groups

There are a range of active Irish groups in China that bring the Irish community and friends of Ireland together, through Irish culture, music, dance, sport, business, the Irish language and more.

The Irish groups active in Shanghai and the surrounding region are listed below. If you wish to add a group to the list, please contact the Consulate. This list is provided for information purposes only. Please note that the Consulate is not responsible for the content of external websites or activities of groups/societies.

Le Cheile – Shanghai Irish Community

GAA Shanghai

GAA Suzhou

Income Tax in China Overview

Much like many other countries, individual income tax in China is derived from several income categories. Even though there have been some changes regarding the structure and consolidation of some of these categories (we discuss this briefly with the new amendments at the end of the article), today an individual is taxed in China according to his/her income in one of the following categories.

The 11 categories of income as enumerated by the IIT law itself are:

  1. Employment income (that is, income from wages and salaries tied to some form of the formal employment contract).
  2. Income from the operation of a sole proprietorship (a legal vehicle for one person to have his/her own company).
  3. Income from the operation of a business through a contract or a lease.
  4. Payment for labor services (that is, working as an independent contractor or providing some kind of labor service).
  5. Remuneration in virtue of being an Author.
  6. Royalties.
  7. Interest, dividends, and profit distribution (this includes all kinds of investments, securities, and titles – and also considers capital gains).
  8. Rental income.
  9. Income from transfer of property.
  10. Incidental income.
  11. Other taxable income as determined by the Ministry of Finance of the State Council (that is, on a city ordinance or decree level, the Ministry can determine additional sources of income from which IIT can be derived).

*It’s important to mention that each one of these types of income has its own tax rates, its own specific allowable deductions, as well as subsidies and tax credits that vary due to an individual’s personal situation and a great many other factors.

In China, the tax ends on December 31st. For individuals, the law demands they file a report and pay advances on a monthly basis. The deadline date for submitting an annual report and making or negotiating payments is May 31st.

Failing to meet this deadline can lead to serious fines and sanctions. Employers in China have to submit a monthly report on their employees’ wages and to pay the tax deducted within 7 days of the end of the previous month.

Employment Income: The Most Common Source

Employment income is one of the most common bases for individual income tax in China. Having said this, it is important to understand the specifics in this category and get an idea of the numbers.

The rates applicable for monthly taxable income derived from employment contracts/ relationships are as follows:

Monthly taxable income (CNY)Tax rate as a percentage of (%)Quick Calculation for the deduction (CNY)
Grossed incomeNet income
1 to 1,5000 to 1,45530
1,501 to 4,500Over 1,455 to 4,15510105
4,501 to 9,000Over 4,155 to 7,75520555
9,001 to 35,000Over 7,755 to 27,255251,005
35,001 to 55,000Over 27,255 to 41,255302,755
55,001 to 80,000Over 41,255 to 57,505355,505
80,000Over 57,5054513,505

What Is Included in this Base?

It is important to understand that the taxable income in this category includes everything received by an employee in virtue of his/her labor.

Some employers tend to think that commissions and bonuses are not included in this calculation, but they are, as well as any sum paid directly or indirectly for the work performed for the employer.

Just to give you an idea of what this looks like, for an expat, their base could include their base salary, bonuses, expatriate premiums, cost-of-living allowances, mobility premiums, equity-based compensation, and the employer’s payments to overseas social security systems.

For a Chinese employee, it can include sums given to him/her as commissions, sales bonuses, group and individual bonuses that have nothing to do with sales but are related to specific tasks (ie. the best employee of the month bonuses), etc.

The Next Most Common Category: income from Labor Services

When the law says individual income tax is derived from labor services, it means independent service tasks such as design, medical practices, consulting in legal, accounting, the management or other services, among others.

In this category, the IIT is calculated from progressive or incremental tax rates that go from 20% to 40%. These “brackets” tend to be broader than those of the employment income rates, due to the fact that services are more specialized and tend to be better paid. The rates are as follows:

Monthly taxable labor service income (CNY)Tax rate (%)
0 to 20,00020
Over 20,000 to 50,00030
Over 50,00040

How to Define if You Are a Resident Taxpayer?

Speaking of expats, sometimes there is great confusion for foreigners living in China as to their fiscal obligations. Becoming a tax resident in China is becoming a lot easier than before, and also has serious implications because the Chinese tax authority can talk with the individual’s home country tax authority and share information. 

Foreign employees who live in China and earn income are subject to individual income tax based on their length of residence in China, according to the following:

  • Residence of fewer than 90 days in a tax year – Foreign employees who have worked in China for fewer than 90 continuous or cumulative days are taxed only on the income that they earn from Chine companies while working in China.
  • Residence of at least 90 days but less than one year – These workers are subject to individual income tax for all income they have earned while in China, including from domestic and foreign companies. Earnings they earned while overseas are exempt.
  • Residence of one to five years – For foreign workers who have resided in China for at least one year, the tax basis switches to a calendar year, rather than a tax year and excludes temporary absences from the country.  These workers must pay individual income tax on the income they earn in China.
  • Residence of six years or more – Workers who have resided in China for six years or more are subject to individual income tax on all of their earned income, including income they received from working overseas and for domestic or foreign employers.  Read about the Five-years tax rule.

We recommend getting an accountant or talking with us in-depth if you are going to be working in China for more than a year.

*According to Chinese law, an individual is considered to be domiciled in China if he/she resides habitually in the country “by reason of his/her permanent registered address, family ties, or economic interests”. An individual with a Chinese passport or a hukou (household registration) is generally considered as a person who is domiciled in the country.

Recent Updates: The New Amendment

On August 31, 2018, the Amendment to the Individual Income Tax Law (“Individual Income Tax – IIT”) was approved by the competent authorities in China This legislation will be in force on a national level.

Several of the norms in the new amendment have already been in force since October 1, 2018, and the whole law will go into force as of January 1, 2019. With this new IIT law, the structure will switch over to what is usually called a  General Income Structure or Mode, in which the varying incomes of individuals from their salary, labor services, and remuneration and royalty incomes as authors, are taxed in a consolidated fashion.

The tax bracket calculation will change from a monthly base to an annual base. However, individual income tax will still be paid on a monthly basis and is still obliged to an annual filing from March 1 to June 30 of the next year.