Beijing FIEs Now Subject to Labor Union Fees

From July 2011, foreign invested enterprises (FIEs) in the pilot areas of Beijing (Dongcheng, Xicheng, Chaoyang, Mentoutou and Shunyi District) will be required to pay labor union fees, according to a recent announcement made by the Beijing Labor Union.

In addition, an FIE with more than 25 employees is required to either establish a labor union by itself, or join the community labor union. Smaller FIEs with less than 25 employees can only join the community labor union. Each enterprise is required to submit an application letter together with other application documents to the designated local tax authority. The local tax authority will then review the documents and provide instructions on how to join the community labor union or establish an independent labor union. Establishing an independent labor union involves more procedures and is thus more time-consuming and complicated than joining the community labor union.

This regulation takes effect as of July 1, 2011, and the FIEs in the pilot area should file labor union fees from the third quarter of 2011 within the first 15 days of October. FIEs in other areas of Beijing will be liable for such labor union fees beginning from the fourth quarter of 2011, which will be paid in the beginning of January 2012.

The purpose of the labor union fee is to assist with staff welfare and protect employees’ rights. The calculation of the labor union fee is 2 percent on the total salary compensation of the company. The labor union fee shall be filed and paid on a quarterly basis.

Up to 60 percent of the paid-up labor union fee can be claimed back through reimbursements from the Beijing Labor Union for the expenditure of the individual labor union or members, but the legal and valid documents such as the official tax invoice and the relevant off-shore bill which is related to staff welfare must be provided.

FIEs should begin preparation for the calculation of the additional fee, inform the overseas holding company about this change, and calculate the additional amounts due.

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