China Issues New Measures For Hong Kong, Macao And Taiwan Residents Residing In Mainland China.

24 September, 2018

 

China no longer requires Hong Kong, Macao and Taiwan residents ("HMT residents", i.e., Hong Kong, Macao and Taiwan passport holders with relevant mainland travel permits) to hold an employment permit to work in mainland China. Moreover, HMT residents are now eligible to receive mainland residence permits. These changes are part of the government's attempt to facilitate the work, study and stay of HMT residents in mainland China and to protect their rights and benefits.

 

HMT residents no longer need an employment permit to work in mainland China

 

Following the State Council's circular related to the abolishment of employment permit requirements for HMT residents, the Ministry of Human Resources and Social Security (HRSS) repealed the Regulations for the Administration of the Employment in Mainland China of Taiwan, Hong Kong and Macao Residents, effective 23 August 2018. On the same day, the HRSS issued the Notice Related to Employment Matters of Hong Kong, Macao and Taiwan Residents in Mainland China to manage the transition away from the employment permit requirements for HMT residents.

 

In the notice, the HRSS instructed the local HRSSs to completely halt the processing of employment permit applications for HMT residents. Local HRSSs have responded and stopped processing employment permit applications of any kind from HMT residents as of August 2018.

 

To offset the loss of the employment permits, the notice also provides substitute methods to replace the ancillary regulatory functions that the employment permits had been serving for HMT residents.

 

According to the notice, HMT residents can use their mainland travel permits (i.e., Home Return Permit Hui Xiang Zheng for Hong Kong and Macao residents, and Taiwan Compatriot Permit Tai Bao Zheng for Taiwan residents) as the supporting document to satisfy other document and regulatory requirements, such as when enrolling in PRC social security.

 

To prove their employment in mainland China, in lieu of the employment permit, employees may use their employers' business licenses, their employment contracts, their salary payment vouchers or their social insurance contribution records. Valid employment permits can still be used as proof of employment in mainland China up until 31 December 2018; afterwards, they will no longer be accepted for that purpose.

 

HMT residents are now eligible for mainland residence permits

 

Starting from 1 September 2018, China has implemented new measures to allow HMT residents to apply for mainland residence permits. HMT residents who reside in mainland China for more than six months may apply for mainland residence permits if they meet any of the following criteria:

 

• have a stable job in mainland China
• hold a legitimate and stable residence in mainland China
• attend a school in mainland China

 

Mainland residence permit applications will be administered by local police stations, so detailed documentation requirements may vary by location. Local police stations retain broad discretion on what constitutes "reside in mainland China for more than six months" as official clarification has yet to be released. 

 

According to a police official in Beijing, HMT residents generally will be required to have resided in mainland China for six months before they can apply for mainland residence permits. However, HMT residents newly arriving in mainland China may also apply for the residence permits if they can prove that they will hold a stable job or maintain a home in mainland China for at least one year.

 

With the mainland residence permits, HMT residents can enjoy the same rights as mainland Chinese residents in accessing 18 public services, including participating in local social insurance, accessing the housing provident fund and benefitting from other services according to the local law where they reside.

 

Key takeaways

 

China has launched several measures to make it more convenient for HMT residents to stay, work and study in mainland China. The measures associated with the employment of HMT residents are of particular interest to employers.

 

HMT residents are no longer required to obtain employment permit approvals before they can work in mainland China. Instead, they can start working directly after entering into an employment contract. Nonetheless, HMT residents are still required, like other foreign passport holders, to register their residence with the local police station and obtain a Temporary Residence/Accommodation Registration Form within 24 hours of entering mainland China. Late registrations may trigger penalties.

 

For any employment permit application currently being processed by local HRSS, the employer should confirm with the local HRSS whether it will complete the application process. From our observations, Shanghai HRSS will complete the process and issue the employment permit if the application has already been accepted, while other HRSSs may revoke the application after notifying the employer or sponsor entity.

 

While it is now easier for HMT residents to work in mainland China, their tax liabilities will still be impacted by the Individual Income Tax Law Amendment Bill issued on 31 August 2018. The amendment bill introduces key changes to the law. In particular, the bill:

 

• reduces the time presence threshold for a non-domiciliary to constitute a Chinese tax resident
• adjusts taxable income categories, tax brackets and deduction items
• introduces new anti-avoidance rules

 

The amendment bill will take effect from 1 January 2019, but the adjustment to the tax brackets and deduction items will also apply to salaries and wages, as well as operating income derived as from 1 October 2018. A client alert discussing the key provisions introduced under the bill and their implications will be forthcoming.