Regulatory Updates

Regulatory Updates of Interest

China is instituting changes involving the use of third-party quasi-governmental organizations.  These organizations will no longer be allowed to provide social insurance and housing fund payments to the local authorities in Beijing on behalf of their clients.  This change could roll out to other cities such as Shanghai, Shenzhen and impact companies doing business in these regions.  Up to now, if you had a WOFE registered in Shanghai and an employee in Beijing but you did not setup a Beijing branch of the Shanghai WOFE, you could use an approved third-party organization to run the payroll and make these payments. This is no longer possible, and as a result, companies will be forced to setup a branch.

Please note, however, that these rules do not affect the manner in which payroll is run for Representation Office related employees.

If you have a GmbH in Germany and a U.S. employee visits Germany on a number of occasions, not on US business but on the business of the GmbH, the tax authorities (Finanzamt) may seek to tax that individual’s salary for the days he/she has spent in Germany. A similar exposure applies in Netherlands and France. Thus, it is important that travel logs are kept recording days spent outside US and where together with supporting information.