My company intends to provide employees with a sanatorium at public expense once every three years, what is the difference in tax treatment between giving cash directly to employees and taking reimbursement notes from employees?
Answer: The Regulations for the Implementation of the Individual Income Tax Law stipulates in Article 8 (1) that the income from wages and salaries refers to the wages, salaries, bonuses, year-end raises, labor bonuses, allowances, subsidies, and other income related to the position or employment that an individual obtains as a result of the position or employment.
Article 10 stipulates that the forms of individual income include cash, in-kind, marketable securities and other forms of economic benefits. If the income is in kind, the taxable income shall be calculated in accordance with the price stated on the voucher obtained; if there is no voucher in kind or the price stated on the voucher is obviously low, the taxable income shall be approved with reference to the market price. If the proceeds are securities, the taxable income shall be approved according to the face price and the market price. If the proceeds are other forms of economic benefits, the taxable income shall be approved with reference to the market price.
Article 3 of the Circular of the State Administration of Taxation on the Deduction of Wages, Salaries and Employee Welfare Expenses of Enterprises (Guo Shui Han [2009] No. 3) stipulates that the employee welfare expenses of enterprises as stipulated in Article 40 of the Implementing Regulations shall include the following:
(1) Equipment, facilities and personnel expenses incurred by the welfare departments of the enterprises that have not yet implemented the separation of the function of running a social organization. These include the equipment, facilities and repair and maintenance costs of collective welfare departments such as staff canteens, staff bathrooms, hairdressing salons, medical clinics, nurseries and sanatoriums, as well as the wages and salaries, social insurance premiums, housing provident funds, and labor costs of the staff of the welfare departments.
(2) Subsidies and non-monetary benefits for employees' health care, living, housing, transportation, etc., including medical expenses paid by enterprises to employees for overseas medical treatment on official business, medical expenses for employees of enterprises that do not have medical coordination, medical subsidies for employees' dependent immediate family members, subsidies for heating costs, summer heat-prevention and cooling costs for employees, hardship subsidies for employees, relief expenses, subsidies for employees' canteen funds, and transportation subsidies for employees. subsidies, etc.
Article 1, Paragraph 1 of the Announcement of the State Administration of Taxation on Pre-tax Deduction of Expenditures on Wages and Salaries and Employee Welfare Fees of Enterprises (Announcement of the State Administration of Taxation No. 34 of 2015) stipulates that welfare subsidies included in the wage and salary system of an enterprise's employees and fixedly paid together with wages and salaries are in line with the Circular of the State Administration of Taxation on the Issues of Deduction of Wages and Salaries of Enterprises and Employee Welfare Fees " (State Taxation Letter [2009] No. 3) of the first paragraph, can be used as the wages and salaries incurred by the enterprise expenditure, in accordance with the provisions of the pre-tax deduction.
According to the above provisions, to provide regular public health care for employees, directly to the employee cash and employee reimbursement bills, the treatment of personal income tax is the same, are to be "wages, salaries," withholding of personal income tax; if included in the enterprise employees' wages and salaries system, fixed and wages and salaries issued together with the cash Subsidies, before the enterprise income tax can be fully deducted as wages and salaries, reimbursement of bills to be used as employee welfare expenses limit deductions.