Tax reform to encourage creation of more pensions

• Source: Global Times
• [01:53 December 14 2009]
• Comments

People wait to pay their taxes at a tax bureau in East China's Zhejiang Province. China released new regulations on retirement pension taxes December 10. Photo: CFP

By Chen Yang

A national standard for the personal income tax workers pay on their pensions was announced Thursday, with the State Administration of Taxation (SAT) saying the standard will help more companies establish a pension system for their employees.

In China, pensions are comprised of the supplemental income paid to retired workers on top of the standard retirement benefits they receive.

They are jointly funded by employers and employees and include investment income derived from the pooled funds.

Employees' contributions to their pensions will now be added to their normal taxable income and taxed at the corresponding rate, while employers' pension contributions will be treated as separate income and taxed at a relatively lower rate, the SAT said in a statement released Thursday on its website.

The upper limit for an employer's contribution to a worker's pension is one-twelfth of the employee's salary in the past year, and the upper limit for the combined payments of the employee and the employer is one-sixth of the employee's salary during the same period, according to the Ministry of Human Resources and Social Security (MOHRSS).