Do companies sending foreign workers to China have to include social insurance premiums into the salary income of the foreign employee?

The circular on the taxation of social insurance funds paid by foreign-invested enterprises to foreign employees in China (Guo Shui Wai Zi [1988] No. 170) stipulates:
The social insurance benefits paid by a foreign-invested enterprise (hereinafter referred to as the enterprise) to a foreign employee in China belong to the employee’s investment in obtaining social welfare and are an integral part of his total salary. In accordance with the provisions of China’s individual income tax law on the fixed deduction of income tax from wages and salaries, in principle, the above insurance benefits paid by the enterprise to foreign employees shall be included in the taxable income of the employee and shall not be deducted. In order to facilitate implementation, it is hereby clarified as follows:
  1. The social insurance benefits paid by an enterprise to a foreign employee shall be directly paid by the employee according to the laws of his country. Whether they are included in the salary or paid separately outside the salary, they shall also be included in the taxable income of the employee.
  2. The social insurance benefits paid by an enterprise to foreign employees that should be withheld by the employer according to its domestic law can be handled in one of the following ways:
    1. It is not included in the salary income of the employee, but the enterprise shall not be disbursed as an expense when calculating and paying enterprise income tax.
    2. Included in the salary income of the employee, the enterprise is allowed to be disbursed as an expense when calculating and paying enterprise income tax.
  3. Other forms of insurance (including life insurance, property insurance, liability insurance, and credit guarantee insurance, etc.) invested by enterprise employees out of their own will shall not be deducted in addition to the fixed deduction fees stipulated in the tax law. (the effectiveness of this document is unclear at present, and it has been replaced by subsequent policy documents in terms of content.)
Article 2 of the notice of the State Administration of Taxation on the treatment of income tax related to overseas insurance premiums of employees of foreign-invested enterprises and foreign enterprises (Guo Shui Fa [1998] No. 101) stipulates that:
  1. All kinds of overseas insurance premiums paid or borne by an enterprise for its employees working in China, which have been deducted from the enterprise’s taxable income in the name of paying their employees’ wages and salaries, shall be included in the employees’ personal wage and salary income, and the individual income tax law of the people’s Republic of China shall apply.
  2. In principle, the overseas insurance premiums paid or borne by an enterprise for its employees working in China without deduction from its taxable income shall also be included in the employee’s personal wage and salary income, and the individual income tax shall be declared and paid in accordance with the individual income tax law of the people’s Republic of China and the relevant provisions of the international tax treaties. However, the expenses of social security that should be borne by the employer in accordance with relevant national laws and regulations may not be included in the individual taxable income of the employee after being reported to and approved by the local competent tax authority.
  3. All kinds of overseas insurance premiums paid by an employee working in China shall not be deducted from the employee’s personal taxable income.
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