Beijing Government Issues Circular on Collection of Union Fees

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May 4 – The General Office of the People’s Government of Beijing Municipality has issued the “Circular on the Commencement of the Pilot Work with regard to the Collection of Union Contributions and Preparation Fees by the Beijing Local Tax Bureau (Jingzhengbanhan [2010] No. 34).”

According to the circular, starting from July 1, 2010, Beijing Municipality would begin pilot work on the collection of union contributions and preparation fees in the Xuanwu, Fengtai, and Changping districts.

Beijing employers are required to pay 2 percent of total payroll on a quarterly basis to the local tax bureau. Payments are due within 15 days of the completion of the quarter and delinquent payments are subject to a penalty of 0.5 percent per day of the outstanding payment.

The union contributions and preparation fees will be paid into the union contributions account of the Beijing Branch of All-China Federation of Trade Union (Beijing ACFTU). For those employers that have already established union contribution accounts, the portion of the union contributions that should be retained by the employer will be directly transferred to the union contributions account after the Beijing ACFTU’s examination and approval.

Although currently restricted to Beijing, the scheme affects all foreign invested companies in the area. As a pilot, it is a test case to establish how successful the program is. If so, it may herald the rolling out of the union fee collection being introduced on a national basis, adding an additional 2 percent to total payroll costs of all FIEs that do not currently engage a trade union or are small enough not to possess such a structure. As such, it can be considered an additional potential cost burden that may yet add to China business operational costs.

This article was originally published on the Dezan Shira & Associates online business resources library. To view the original article, and other regulatory updates, please click here.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China. For more information on the above regulation, you can email our Beijing office at beijing@dezshira.com, visit www.dezshira.com, or download the firm’s brochure here.