Tax Deduction for Employing Laid-Off Workers

Sources from the Ministry of Labour and Social Security (MLSS) said that private enterprises will be entitled to tax deduction of Rmb4,000 for employing every laid-off worker. The initiative is one in a series of latest measures to help laid-off workers seek re-employment. Hong Kong companies can take advantage of the initiative to lower production costs.

Over ten government departments including the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) have recently issued circulars to promote re-employment of laid-off workers. These circulars outline measures supplementary to the State Council's Circular on Further Promoting Employment and Re-Employment promulgated at the end of last year, and cover various ways of promoting re-employment including capital management, tax deduction, guarantee for small loans, reduction in fees and charges, and pilot schemes on unemployment insurance. These measures have been fully implemented since April this year.

A MLSS official added that starting from April, the measures are also applicable to private enterprises employing laid-off workers.

Yu Faming, director of the training and employment department of MLSS, said that a new preferential policy of "fixed amount deduction" in taxation will be adopted for enterprises employing laid-off workers, replacing the old policy whereby tax deduction was granted only when the number of laid-off workers employed reached 30% of an enterprise's total workforce.

The principle of "fixed amount deduction" was stipulated in the Circular on Taxation Policy on Re-Employment of Laid-Off Workers issued jointly by MOF and SAT. It applies to enterprises engaged in commerce, services and labour employment services as well as small-scale processing enterprises in residential districts. If these enterprises recruit laid-off workers, sign labour contracts with them for at least one year and pay social insurance for them in accordance with law, they will be entitled to deduction in business tax, urban construction tax, education expenditure surtax and corporate income tax. A fixed amount of Rmb4,000 in tax deduction annually will be granted for each laid-off worker employed. For laid-off workers setting up individually-owned businesses, a maximum tax deduction amount of Rmb8,000 each year will be allowed.

Furthermore, enterprises employing laid-off workers with great difficulties in seeking re-employment will be granted social insurance subsidy by the government. Laid-off workers with great difficulties refer to women aged over 40, men aged over 50 and those in a family where both husband and wife are laid off. According to a MLSS official, if these workers are offered employment, their employers will be entitled to subsidies in social insurance and wages to cover fees for the workers' old-age, medical and unemployment insurance to offset the employers' labour costs.