Overview of Chinese Statutory Deduction Cards

Deduction Groups

Chinese statutory deductions are categorized into these deduction groups on the deduction card:

Taxes
Social Security
Benefits

Deduction groups appear in the Deduction Overview section of the Manage Deduction Cards page.

Deduction Card Levels

You can create deduction cards at any of these levels:

Personal (payroll relationship)
Tax reporting unit (TRU)
Payroll statutory unit (PSU)

Deduction cards capture different information at different levels. The information defined at a lower level overrides values defined at higher levels. For example, an exemption amount defined on a personal deduction card overrides the exemption amount defined in deduction cards at the TRU and PSU levels and in deduction ranges defined at the legislative level.

Use these tasks to manage deduction cards at each level:

For personal deduction cards, use the Manage Personal Deductions task in the Payroll Administration work area.
For TRU-level cards, use the Manage Legal Reporting Unit Deduction Records task in the Setup and Maintenance work area.
For PSU-level cards, use the Manage Legal Entity Deduction Records task in the Setup and Maintenance work area.

Deduction Components

Each deduction group supports a set of deduction components that you can add to a deduction card. Supported components vary depending on the card level. Most deduction components correspond to a specific payroll deduction, such as individual income tax. However, some components, such as Foreigner Code and Social Security Card Number, capture information used only in reporting. You can create only one deduction component per deduction type on a deduction card, except for Social Security Card Number and Foreigner Code.

Each deduction component can have one or more sets of component details that capture data used to process the deduction. For example, the component details for a medical insurance deduction component capture the employee's account number into which contributions are made.

Deduction components in the Taxes deduction group include:

Aggregation Information: This component is created automatically when you create a personal statutory deduction card, but you must create an association on the card linking the component to valid employment terms. This component has no component details and allows no overrides. It applies only to personal deduction cards.
Individual Income Tax Deduction: Individual income tax is a mandatory deduction for all employees in most cases. Add this component to the personal deduction card of each employee requiring the tax calculation, and select the employee's tax exemption amount category. The application determines the tax exemption amount the person is entitled to based on the category you select. For example, effective from September 1, 2011, the amount for mainland China residents with mainland China income is 3500 yuan, and the amount for expatriates is 4800 yuan. If an employee qualifies for a further tax reduction or exemption, set the Tax reduction or exemption status to Yes, and then create an override that defines the employee's special tax reduction rate.

Rates and rules required for calculating individual income tax are predefined at the legislative level in deduction ranges. You can set up territory-specific tax exemption amounts at the PSU level. If an employee is entitled to a special tax reduction rate, you can enter the rate as an override on the employee's deduction card.

This table describes the deduction components in the Taxes deduction group.

Component	Card Level	When to Add Component to Deduction Card	Component Details Captured	Overrides Allowed
Aggregation Information	Personal	This component defines the level at which payroll run results are split for tax deductions. This component is created automatically when you create a personal deduction card. You must associate this component with a valid employment term. This component has no component details.	None	None
Individual Income Tax Deduction	Personal	Individual income tax (IIT) is a mandatory deduction for all employees in most cases. Add this component to a personal deduction card to process IIT. The application determines the tax exemption amount the person is entitled to based on their category. For example, effective from September 1, 2011, the exemption amount for mainland China residents with mainland China income is 3500 yuan, and the amount for expatriates is 4800 yuan. If an employee qualifies for a further tax reduction or exemption, indicate so on in the component details and then create an override that defines the employee's special tax reduction rate. For example, if a person qualifies for 20 percent tax reduction, you would enter 0.2 in the Rate field.	Tax exemption amount category Tax reduction or exemption status (entitled or not entitled)	Special Tax Reduction Rate
Foreigner Code	Personal	Add this to an expatriate worker's personal deduction card if a company is located in an area where foreigner codes are issued to expatriates, as is the practice in Shenzhen.	Foreigner code	None
Individual Income Tax Deduction	PSU	Add this component if you want to define territory-specific override values for tax exemption amounts. You must select a territory as a reference value for the component. The override values you enter will then be used when processing tax exemptions for that territory.	None	Tax Exemption Amount (for mainland China residents) Tax Exemption Amount for Foreigners Tax Exemption Amount for Seamen Tax Exemption Amount for Overseas Chinese Tax Exemption Amount for Hong Kong, Macao and Taiwan Residents

Social Security Deduction Components

You can set up calculation methods, rounding methods, rates and amounts for social insurance, public housing fund, and enterprise deductions by territory and hukou type at the payroll statutory unit (PSU) and tax reporting unit (TRU) levels. You can create overrides for these values on a personal deduction card as needed.

Social security deductions are optional pretax deductions. You can set up calculation methods, rounding methods, rates and amounts by deduction type by territory and Hukou type at the PSU level and at the TRU level.

Note: Rates for social security deductions may vary by territory and Hukou type and must be defined as deduction card overrides; no rates are predefined in deduction ranges at the legislative level.

You can create overrides for these values on a personal deduction card as needed. This table describes the deduction components in the Social Security deduction group.

Component	Card Level	When to Add Component to Deduction Card	Component Details Captured	Overrides Allowed
Public Housing Fund (PHF) Basic Pension Insurance Basic Medical Insurance Supplementary Medical Insurance Unemployment Insurance Maternity Insurance Work-Related Insurance	Personal	Add one or more of these components if an employee elects to take the corresponding deduction.	Account number into which the contribution is made and the account's status Method used to calculate the contribution base Force recalculation of contribution base indicator	Employee and employer contribution rates Fixed employee and employer contribution amounts Employee and employer nontaxable contribution threshold rates* Fixed employee and employer contribution base amounts Nontaxable contribution base threshold*
Social Security Card Number	Personal	Add this to capture a person's social security number and the territory where that number was issued. A person can have multiple social security card numbers issued by different territories. This information isn't used in payroll run processing or reporting.	Card number	None
Common Information	TRU	Add this to define the social security contribution deferment type for a specific tax reporting unit. Do this during initial setup and as needed when changes occur.	Social security contribution deferment type	None
Public Housing Fund (PHF) Basic Pension Insurance Basic Medical Insurance Supplementary Medical Insurance Unemployment Insurance Maternity Insurance Work-Related Insurance	TRU	Add these components to define TRU-specific overrides and set the rounding method to use when calculating the contribution amounts if TRU-specfiic. Do this during initial setup and as needed when changes occur, if the values are different from those defined at the PSU level.	Contribution Information Details, including the rounding method	Employee and employer contribution rates Fixed employee and employer contribution amounts Employee and employer nontaxable contribution threshold rates*
Public Housing Fund (PHF) Basic Pension Insurance Basic Medical Insurance Supplementary Medical Insurance Unemployment Insurance Maternity Insurance Work-Related Insurance	PSU	Add these components to define PSU-level overrides and other deduction processing information, such as when and how to calculate the contribution base and the rounding method to use when calculating the contribution amount. Do this during initial setup and as needed when changes occur.	Contribution Base Information Details, including switch month, switch period, rounding method, and methods used for calculating the contribution base and upper and lower limits Contribution Information Details, which specifies the rounding method	Employee and employer contribution rates Fixed employee and employer contribution amounts Employee and employer nontaxable contribution threshold rates* Nontaxable contribution base threshold* Fixed employee and employer contribution base amounts Fixed contribution base upper and lower limits City lowest average monthly salary in previous year City and provincial average monthly salary in previous year

*Not supported for Supplemental Medical Insurance, Maternity Insurance, or Work-Related Injury Insurance

Benefits Deduction Components

The Benefits deduction group includes the Enterprise Annuity component, an optional benefit that's provided by some employers in China, and may include other types of benefits. The component details you provide for an Enterprise Annuity are similar to those for Social Insurance components. Enterprise annuity is a post-tax deduction.

Component	Card Levels	When to Add Component to Deduction Card	Component Details Captured	Overrides Allowed
Enterprise Annuity	Personal	Add this to a personal deduction card if an employee elects to take the deduction.	Account number into which the contribution is made and the account's status Method used to calculate the contribution base Force recalculation of contribution base indicator	Employee and employer contribution rates Fixed employee and employer contribution amounts Employee contribution rates by years of service Fixed employee and employer contribution base amounts
Enterprise Annuity	TRU	Add this to define TRU-specific overrides and to set the rounding method to use when calculating the contribution amount, if this information is TRU-specific. Do this during initial setup and as needed when changes occur, only if the values are different from those defined at the PSU level.	Contribution Information Details, which specifies the rounding method	Employee and employer contribution rates Fixed employee and employer contribution amounts Employee and employer contribution rates by years of service
Enterprise Annuity	PSU	Add this to define PSU-level deduction processing, such as when and how to calculate the contribution base and the rounding method to use when calculating the contribution amount. Do this during initial setup and as needed when changes occur.	Contribution Base Information Details, including switch month, switch period, rounding method, and methods used for calculating the contribution base and upper and lower limits Contribution Information Details, which specifies the rounding method	Employee and employer contribution rates Employee and employer contribution rates by years of service Fixed employee and employer contribution base amount Fixed contribution base upper and lower limits City lowest average monthly salary in previous year City and provincial average monthly salary in previous year

Tax Reporting Unit Associations

For personal deduction cards, you create associations that link components to a tax reporting unit. You must associate the Aggregation Information component with specific employment terms. You can associate one or more social insurance deduction components with different TRUs if, for example, an employee wants to contribute social insurance to a different area than they contribute individual income tax. To do so, you must first create an association linking the deduction card with the main TRU. Then you must add associations for each social security deduction component that reports to a different contribution area than the territory of the main TRU.