Guangdong Province Releases Measures on the Collection of Labor Union Funds

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Jul. 23 – The Guangdong Provincial Federation of Labor Unions, Guangdong Local Taxation Bureau and the Guangzhou Branch of the People’s Bank of China jointly released the “Interim Measures of Guangdong Province on Collection and Management of Labor Union Funds (yuegongzong [2013] No.63, hereinafter referred to as ‘Measures’)” on April 11, which regulate the collection, allocation and management of labor union funds within the administrative region of Guangdong Province. Detailed information can be found below.

Applicable Scope
According to the Measures, labor union funds paid by entities within Guangdong Province shall be collected by the local taxation authorities starting from July 1, 2013.

The following entities that have established labor unions within the province shall pay the labor union funds:

  • Enterprises;
  • Public institutions;
  • Government organs; and
  • Other economic organizations and social organizations.

The above-mentioned entities shall pay the preparation funds for the establishment of a labor union if they fail to establish one within six months of their founding.

The Measures do not apply to the following entities:

  • Entities engaged in railway, civil aviation or finance that independently manage their funds upon approval by the All China Federation of Labor Unions; and
  • Administration organs and public institutions whose wages are paid by fiscal funds on a uniform basis.

Payment Standard
The Measures provide that relevant entities shall pay 2 percent of the total monthly wages of their employees as labor union funds.

The amount of total wages shall be calculated based on the standards prescribed by the Provisions on the Composition of Total Wages issued by the National Bureau of Statistics and other relevant provisions. Where the amount of total wages is difficult to calculate, it shall be determined according to the average local wage of the previous year released by the relevant statistics departments.

Collection of Labor Union Funds
The collection of labor union funds shall be managed according to the “territory-based administration” principle, meaning an entity under the payment obligation shall directly report and pay the funds to its local taxation authority.

The payment of labor union funds shall be made on a monthly basis. Relevant entities shall truthfully fill out the report form by the 15th of each month and pay the labor union funds for the preceding month when filing for tax declarations with the local taxation authorities.

The local taxation authorities shall issue taxation certificates when collecting the labor union funds, and such funds paid by the entities can be deducted prior to the payment of corporate income tax upon the strength of the payment certificates.

Allocation of Labor Union Funds
A federation of labor unions at or above the level of prefectural cities shall, within 15 working days of the following month after receiving the labor union funds, re-allocate the funds to be shared by grass-roots labor unions to the accounts of the entities making the payments.

For entities paying the preparation funds for the establishment of the labor union, if they establish the labor union within three years after the Measures take effect, the funds that were to be allocated to them shall be fully distributed. However, if they fail to establish the labor union within the three-year period, the funds that were to be allocated to them for the year of establishment of the labor union shall be returned. Furthermore, the funds that were to be allocated to them for the years before the establishment of the labor unions shall be handled in accordance with the Measures for Handling Doubtful Debts of Labor Union Funds.

According to the Bank of China, the steps for opening a labor union account are as follows:

  1. Establishing a labor union
  2. Carving the labor union seal
  3. Obtaining the Legal Person Certificate
  4. Applying for the Organization Code Certificate of Labor Union
  5. Opening the bank account

The Measures are scheduled to take effect on July 1, 2013.

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