Provisions on China IIT Related to Maternity Allowance and Leave Wage
Pursuant to Notice on Individual Income Tax Related Policies Concerning Maternity Allowance and Maternity Leave Wage jointly issued by Ministry of Finance and State Taxation Administration of China, the maternity allowance, maternity medical expenses and other allowances and subsidies of maternity insurance nature obtained by pregnant women staff in accordance with maternity insurance provisions formulated by people’s government on or above the county leave shall be exempted from individual income tax.
Most clients tend to believe that maternity allowance equals to maternity leave wage. Although the Notice of Beijing Municipal Medical Security Bureau on Issues related to Regulating the Payment of Maternity Insurance Allowance stipulates that maternity allowance is maternity leave wage, maternity leave wage cannot be replaced by the concept of maternity allowance.
Difference between Maternity Allowance and Maternity Leave Wage
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Item
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Maternity Allowance
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Maternity Leave Wage
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Paid by
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Maternity Insurance Fund
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Employer
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Payment Standard
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Average payment base of the employer company in the month of childbirth / 30 days * days of maternity leave
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Salary standards of the female employee before the maternity leave
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IIT
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Exempted
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Withhold and pay
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Remarks
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Maternity allowance is often referred to as maternity leave wage. In case the maternity allowance is higher than salary standards of the female employee before the maternity leave，the employer company cannot skimp the maternity allowance. If maternity allowance is lower than the salary standards of the female employee before the maternity leave, the employer company shall pay the difference
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To sum up, maternity allowance is often referred to as maternity leave wage, while, strictly speaking, maternity leave wage does not equal to maternity allowance. Maternity leave wage will incur only when the female employee hasn’t participated in the maternity leave project or when the maternity allowance is lower than salary standards of the female employee before the maternity leave. In case the female employees do not attend maternity insurance project, the employer company shall pay maternity leave wage and withhold individual income tax based on the salary standards of the female employee before the maternity leave. If maternity allowance is lower than the salary standards of the female employee before the maternity leave, the employer company shall pay the difference and withhold individual income tax for the difference paid.
Kaizen hopes its clients could distinguish the difference between maternity allowance and maternity leave wage through the above analysis, distribute maternity allowance or maternity leave wages and declare staff’s individual income tax correctly to avoid potential labor dispute and tax risks.
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