Employee compensation guidelines for the new Enterprise Income Tax Law and adjust the differences

Abstract: New accounting standards fully cover the variety of our current practices in employee benefits, the system regulates the scope of employee compensation and accounting treatment. In 2008, implementation of the new enterprise income tax Law also made a deduction of labor costs adjustment. norms and tax provisions in respect of emoluments for the staff there is a big difference, in practice, result in more tax errors. In this paper, criteria for employee compensation and tax differences and how the issue of tax adjustments.

Keywords: accounting payroll tax adjustments coordination between income tax Law
1 new guidelines for the main characteristics of employee compensation
1.1 The establishment of the concept of covering a wide range of employee benefits, labor costs make companies more complete and accurate accounting.

1.2 was first introduced and regulated the treatment of termination benefits.

1.3 unified the various types of employee compensation recognized principles and accounting methods.

2 criteria and the new employee pay the difference and adjust the income tax Law
2.1 The range of differences in employee compensation and adjustment
New accounting standards in employee compensation, including employee services enterprise in return for giving various forms of remuneration or consideration, a total of eight elements: wages, bonuses, allowances and subsidies, employee benefits, medical insurance, endowment insurance, unemployment insurance, work injury insurance and maternity insurance and other social insurance, housing provident funds, union funds, and employee education expenses, non-monetary benefits, termination benefits and other services offered by the employees related expenses.

<"Enterprise Income Tax Law"> no concept of employee salaries, wages and salaries were only defined in the employee benefits and accounting decomposition of wage and salary, the basic old-age insurance, basic medical insurance, unemployment insurance, industrial injury insurance and maternity insurance, housing fund, the enterprise paid to investors or employees of commercial insurance, employee benefits, union funds, staff education and funds were provided for. Therefore, in the tax treatment, and can not simply pay as workers in the pre-tax wages and salaries net, should the employee benefits accounting decomposition of the corresponding expenses for the tax, according to tax Law to determine whether the tax deduction.

Between 2.2 and adjustment of wages and salaries
Accounting standards on wages is provided by National Bureau of Statistics of hourly wages constitute the total amount of wages, piece rate, the excess paid to the employee remuneration, special or additional staff to compensate for the labor consumption and for other special reasons, the allowances paid to employees, and price subsidies.

Defined on the wage and salary tax is paid to the taxpayer in each tax year the business office or employment relationship with its employees are all cash expenses or non-cash forms of payment, including salary, bonuses, allowances, subsidies, end of year plus pay, overtime pay, and other expenses. The new Enterprise Income Tax Law to cancel the previous practice of taxable wages, the enterprise is a reasonable wage and salary expenses are deductible. In other words, companies can make pre-tax salary deduction to the same time with three conditions: First, they must be working or employed in this business, wages and salaries, and second, it is reasonable wages and salaries, the three must be the actual amount of current. in the Administration practice of "office or employment" of the identified major to see if the labor contract is signed, is to pay old-age insurance. "reasonable" employees to judge mainly depends on the actual provision of services and whether in the number of total compensation ratio, all consistent with normal production and operation activities occurred both wages and salaries can be deducted before tax.

In addition, the company allows the wage and salary tax deduction, is the current actual wage paid not only to meet the salary provision in the tax deduction is not allowed. For at the end of the wage and salary provision in the income tax payment of income taxes paid before Huisuan year (last year's deal with unpaid wages can be paid as Huisuan the year pre-tax deduction for wages. If the final settlement payment after the close of the previous year have not wages and salaries should be adjusted by should taxable income. while to settle after the end of last year paid wages, as the annual payment of real wages.

2.3 Staff welfare and adjustment of the differences
2.3.1 The difference between charged
Under the new guidelines as there is no provision for staff welfare will be the standard form of employee compensation, not 14% of the total wage provision, in line with the actual occurrence of the conditions and scope of welfare expenditure or costs included costs related assets .

New corporate income tax changes in the past not more than 14% of total taxable wages provision of welfare provisions can be deducted pre-tax. Emphasized the welfare expenditure to allow tax deductions must be actual and not more than 14% of the total wages .

2.3.2 the difference charged to content
Provisions of accounting standards in employee welfare is mainly used for separation of social functions have not yet implemented, or separation of major and secondary industry, restructuring of enterprises, equipped clinic, staff room, barber shop, nursery and other collective welfare agency staff wages, medical expenses, workers who are wounded toll to go overseas for medical treatment, workers hardship allowance, medical co-ordinate the implementation of enterprise employees are not medical expenses, as well as by provisions in the employee benefits and other expenses.

<"State Administration of Taxation on corporate net wages and salaries and staff welfare issues notice>" (Guo Shui Han [2009] 3 clearly defined enterprise employees in the welfare of content: In addition to the criteria set forth in the content, but also various collective welfare facilities maintenance costs, subsidies for heating costs, staff summer cooling costs, expenses canteen subsidies, transportation subsidies and other trade unions. These costs typically accounting for administrative expenses or labor protection fee processing.

Tax Adjustment: Business in the calculation of the amount of tax deduction for welfare, should the tax law is the scope of welfare expenditure, and accounting treatment of items without making welfare analysis, the amount of its consolidated into the employee benefits occur , the calculated total amount of current welfare actually occurred, and the total wages (payroll tax caliber compared to 14%, adjusted by cost overruns pArt of taxable income, and the pArt of the cost overrun amounts of permanent differences, not in subsequent years "to make an apology abundance."
2.4 a perfect insurance policy and adjustment of the differences
"A perfect insurance policy", ie, medical insurance, endowment insurance, unemployment insurance, work injury insurance, maternity insurance and housing fund. Standard requires enterprises under the State Council, local government or corporate pension plan provides for the standards, metrology to meet obligations and payroll costs should be included in the corresponding amount.

The tax law in this regard is: "Business in accordance with the State Council or provincial government depArtment in charge of the scope and standards required for employees to pay five insurance payment may be deducted." That is beyond the scope and standards of this section, shall not deductible. At the same time be only the amount actually paid less. to mention but unpaid for "a perfect insurance policy" shall not pre-tax deduction, the current more than the extraction of the actual number of paid pArt, allowing the actual payment of Annual net, that is pre-adjusted by the amount allowed for tax reductions this year. reposted elsewhere in the Research Papers Download http://www.hi138.com In addition, "" Enterprise Income Tax Law Enforcement Ordinance>> Article 35 2 provides: "enterprises for investors or employees to pay the supplementary pension insurance, supplementary medical insurance, in the accounts, tax departments within the prescribed scope and standard is allowed to deduct." over a standard part of the current and subsequent years shall not be deducted, provided the unpaid period shall not be deducted, the number of extraction does not exceed the tax law, standards, allowing the deduction in the year actually paid.

2.5 the difference in commercial insurance and adjustment
Standards require that: the purchase of commercial insurance in the form provided to the employees of various employee benefits insurance benefits are included in the cost of related assets or expenses.

New income tax law provisions in this area is: In addition to the provisions of the relevant state enterprises as a special type of work safety insurance premiums paid by employees and for the accounts, provides for deduction of tax authorities and other commercial insurance, the company paid for the investor or the employees commercial insurance, shall not be deducted.

Tax Adjustment: Business in the calculation of taxable income shall be deducted the conditions would be inconsistent with the amount of commercial insurance premiums adjusted by the amount of taxable income, adjusted by the partial formation of a permanent difference.

2.6 Termination benefits and adjustment of the differences
A major change in the new guidelines is to termination benefits, employee compensation included in the scope of accounting, business and employee labor contracts and pay reasonable compensation, and production operations are necessary and reasonable related expenses, included in management costs. For employees have the option of dismissal compensation, the accounting practice is included with the way accrued administrative expenses and projected liabilities.

Tax law is that: the dismissal of the enterprise actual compensation can be deducted. For the right to choose the dismissal of workers compensation liabilities included in the estimated cost by not reasonable and does not endorse this tax.

Therefore, when the income tax return the amount of current to mention the outstanding shall not be deducted in the current period should be adjusted by the amount of taxable income, adjusted by the amount of the deductible temporary differences to form, as treatment of deferred tax assets, the actual payment Time for tax reduction.

Between 2.7 and adjustment of the two funds
According to accounting standards, provision is still in place union funds, the allocation approach, provision charged to administrative expenses. Tax Law provides: "enterprises the payment of trade union funds, must provide a <<receipt of special contributions to union funds allocated>> does not exceed 2% of the total wage and salary portion of deductible. "trade union that the payment of corporate funds, shall not exceed the tax actually paid wages and salaries caliber 2% of the number, the excess shall not be deducted, not to mention the outstanding deductions. does not allow deductions should be adjusted by the amount of taxable income.

Under the new accounting standards, staff education funding provision is still in place, use the approach. Provision for the caliber of the base line with the union funds, from January 1, 2008 onwards, the proportion of 2.5% can be accrued.

<"Enterprise Income Tax Law Enforcement Ordinance>> Section 42 provides:" Except for the accounts, tax departments as otherwise provided, an enterprise's employee education expenditure does not exceed 2.5% of the total wage and salary portion of deductible, the excess are allowed to carry-over deduction in future tax years. "Compared with the old tax law," the excess, allowed deduction in future tax years over "is an innovation, which is in fact allows businesses to place employees in full deduction of expenditure on education, only in less time accordingly deferred.

Provides for the deduction of employee education funding limits, therefore, adjusted by the amount of each, and the new balance in the accounting year the number may be different. Tax adjustment as follows: the total annual real wages as a deduction limit of 2.5%, the first in accordance with the extraction the number and the actual use of contrast, in accordance with the principles and the lower limit for deductions compared to determine the amount deducted in the tax. If the extract is greater than the amount allowed as deductions, increases income. which extract and use part of the deductible limit exceeded to allow deduction in future years. If extraction is less than the amount allowed as deductions, which can be used if the new balance of deferred deduction should be reduced income can be deferred to future years for the amount of enterprise income tax deduction effect should be through the "deferred tax assets" account of the subjects deductible temporary differences.

3 Employee benefits coordination between guidelines and recommendations of the Tax Law
3.1 unified concept and scope of employee compensation
New form, the company's labor costs are no longer limited to wages, bonuses, allowances and subsidies, and its diversified payment. So clearly the new standard and scope of the concept of employee compensation, but the new standard deduction and the tax base is to do adjusted, in the "pay" concept and scope of accounting standards with the very non-uniform, resulting in more tax adjustments, increased the difficulty of the enterprise accounts. Therefore, the use of tax accounting standards in line with the concept of employee compensation and scope of the guidelines and the need for tax coordination, not only conducive to accounting, but also conducive to tax Administration.

3.2 reasonable standards of wages and salaries to be further clarified
New Law to cancel the tax wage, provides that "an enterprise of a reasonable wage and salary expenses are deductible." For "reasonable salary", although a qualitative description of its meaning, but there is no quantitative definition of wages and salaries of different officers reasonable standard. In practice, the arbitrary large, which causes the "full" use of reasonable wage provisions of this flexibility, distortion of "reasonable" means, erosion of corporate income tax base. Therefore, relevant laws and regulations should be introduced as soon as wages and salaries of employees should be defined quantitatively different levels in different enterprises, different types of employees a reasonable wage and salary expenses.

3.3 ensure that the premise of revenue, as a unified standard deduction
For employee benefits, union funds, staff education expenses such as tax law still provides for deduction of the proportion of insurance premiums, also made restrictions. This is to prevent enterprises from arbitrarily increase the cost, revenue assurance is important. However, the enterprise in terms of the increased tax burden, is not conducive to long-term development. If the business point of view of tax avoidance is entirely possible for the part of the expenses in the form of wages sent to employees, the employees or the use of an individual insured, so can avoid tax adjustments, but also in pre-tax deduction. Thus, the control of tax law meaningless. Therefore, under the premise of tax revenue to ensure uniform measurement scale as far as possible, both to simplify the tax process is also beneficial to the development of enterprises.

In short, both the new accounting standards or pay the new tax law aspects of the workers tend to be more relaxed policy environment, an overall reduction in the restrictive, increased supportive. As the starting point of both the principles and different, differences are inevitable, As financial officers should fully understand and grasp the difference between standards and tax laws, tax returns accurately and reduce the tax risks.

References:
[1] Zhang Baoyun and so on. <"New Enterprise Income Tax Law and the implementing regulations and operating practices Reading>>. China Taxation Press.

[2] <"Enterprise Accounting Standards explain the 2008>>. Ministry of Finance Accounting Division.

[3] Wu to Mao, Wang Huai. <"Accounting standards, tax laws and the provisions of financial rules on pay differences between employees of >>.<< accounting communications>>, September 2008.

[4] Liu Lei. <<Payroll accounting and tax treatment of different>>. China Tax Report ,2008-1-21. Links http://www.hi138.com Research Papers Download