Effective planning for international employees - tax, social security, immigration 18 November 2013 Monica Xu Senior Manager PwC International Assignment Services - Hong Kong

PwC Agenda 1.An overview of key issues surrounding international assignees 2.Individual income tax 3.Social security & immigration 4.Possible planning tactics 5.Q&A 2

PwC Key issues surrounding international assignees 3 International assignees Individual tax Corporate tax Social security Immigration Labour requirement

PwC Individual income tax 4

PwC International assignees Business travellers – meetings, marketing, etc. Short- term assignees – projects, trainings, etc. Long-term assignees – executives, management Internal firm services – internal audits, IT Support, trainers, etc. Roles – regional functions 5

PwC De minimis threshold under domestic laws Mainland China90 days Hong Kong60 days India90 days Singapore60 days Malaysia60 days Australia0 day Japan0 day Thailand0 day Indonesia0 day Vietnam0 day 6

PwC Protection under income tax treaty The following conditions must be satisfied for exemption of employment income in other contracting parties: 1.Presence ≤ 183 days in the other contracting party in a calendar year / any 12-month period; and 2.Remuneration is paid by, or on behalf of, an employer who is not a resident in the other contracting party; and 3.Remuneration is not borne by a permanent establishment (PE) [or a fixed base] which the employer has in the other contracting party; and 4.Remuneration is taxable in the contracting party according to the laws in that party. 7

PwC Tax Project leader Finance Employees HR Common problems 8

PwC Common questions Individuals: -Who is tracking? “Who knows I am here?” -What income is taxable? -Double taxation? -Tax filing requirements? Employers: -Who is here? -Cost charges? -Withholding/ payroll taxes? 9

PwC Risks and exposures Individuals: -Non-compliance: tax and immigration -Financial penalties -Inconveniences Employers: -Corporate income tax and immigration exposure -Financial penalties -Unexpected/ unbudgeted costs -Reputational 10

PwC Social security and immigration 11

PwC Social security requirement Hong Kong: Mandatory provident fund Exemption criteria China: social security Law enacted in July

PwC Social security - China 13 Who can be exempted? How much is the monthly contribution? Are there any refund upon departure? What are the types of contributions ? Who need to participate? Is it fully implemented? What if the employer pays for my contributions?

PwC Permanent establishment creation Impacts of immigration 14 Deportation Refusal of entry Significant delays at point of entry Non compliance with tax reporting obligations Non compliance with social security obligations Business disruption Non compliance with regulatory obligations

PwC Immigration update - China 15 Z visa F visa For exchanges, visits, inspections, etc. M visa Z visa R visa S visa For business or commercial purposes Dependent visa Work visa High-level foreign experts who are in urgent need Employers Monetary penalty of RMB10,000 per illegal worker (up to RMB100,000) Confiscation of relevant income Employers Monetary penalty of RMB10,000 per illegal worker (up to RMB100,000) Confiscation of relevant income Employees Monetary penalty of RMB5,000 to RMB20,000 Detention from 5 to 15 days plus penalty Repatriation to home country and prohibited from entering PRC for 10 year (for serious offences) Employees Monetary penalty of RMB5,000 to RMB20,000 Detention from 5 to 15 days plus penalty Repatriation to home country and prohibited from entering PRC for 10 year (for serious offences)

PwC Best practices in immigration Centralised immigration policies Ensuring holistic stance Immigration governance structure with visible board level input Awareness to anticipate immigration changes Short term business visitor tracking Crisis management planning 16 Best Practice compliance solutions Sustainable business growth

PwC Possible planning ideas 17

PwC Planning strategies and considerations Bonus, equity compensation, deferred compensation Onshore and offshore roles and responsibilities Potential challenges from the tax authorities Compliance registration fulfillment Tax efficient remuneration items (e.g., housing) Whether supporting policy and documentation are in place Whether companies are exercising proper control over the policy The eligibility for income exemption or time apportionment claim The way to mitigate double taxation Possible planning tactics Slide 18

PwC Business commuter policy Key messages 19 Proper planning Effective tracking system Individual and corporate tax cost estimates Communicate internally and externally Stay ahead of the changing regulatory requirements Timely tax and other regulatory compliance

Thank you. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC International Assignment Services Holdings Pte Ltd, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2013 PwC International Assignment Services Holdings Pte Ltd. All rights reserved. In this document, “PwC” refers to PwC International Assignment Services Holdings Pte Ltd which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.