The Ministry of Finance, the State Administration of Taxation, and the Ministry of Human Resources and Social Security have jointly issued on June 22nd the Notice (2020) No. 49 related to the extension of the implementation period of the reduction and exemption of the corporate social security insurance premium policy, initially implemented earlier this February.
The extension of the supporting policy is aimed to assist further the companies, especially the small and medium enterprises, in the recovering process post – COVID.
The Chinese social security system consists of five insurance pillars (pension, medical, unemployment, maternity, and work-related injury), and both employer and the employee shall contribute every month.
In order to reduce the burden on the companies, the competent Chinese authorities have already exempted certain companies from paying the social contributions related to pension, unemployment, and work-related injury insurances.
According to the new Notice, the small and medium-sized enterprises in all the provinces are exempted from the payment of pension, unemployment, and work-related injury insurance contributions (the employer's part) until December 2020.
The larger enterprises would follow the previous provisions, meaning that larger enterprises outside Hubei can halve the contributions to the three social insurance pillars (the employer's part) from February to June 2020, while larger enterprises in Hubei could be exempted from the payment of the contributions to the three pillars (the employer's part) from February to June 2020.
In addition, the enterprises in serious difficulties can also apply for the deferral of the contributions up to December 2020.
According to the Notice of the National Bureau of Statistics on the “Latest Measures for the Classification of Enterprises into Micro, Small, Medium and Large-sized ones for Statistical Purposes” (2017), an enterprise is classified in one of the categories based on the industry, the number of employees and the yearly turnover. For enterprises engaged in the manufacturing business, the thresholds to be classified as SME are: