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China’s ESG Reporting Standards: Preparing Businesses for 2026 and Beyond

October 15, 2025 by galaxy

October 15, 2025

China’s ESG Reporting Standards: Preparing Businesses for 2026 and Beyond

China is entering a new era of corporate accountability.
For years, sustainability reporting in the country remained voluntary — guided largely by investor expectations rather than regulation. That phase is coming to an end.

With the rollout of the Chinese Sustainability Disclosure Standards (CSDS) and the new stock-exchange ESG disclosure rules, China is establishing one of the most comprehensive sustainability reporting frameworks in Asia. From 2026, large listed and dual-listed companies will be required to release full ESG reports for the 2025 financial year.

These standards, which will become fully operational by 2030, are designed to bring Chinese businesses in line with international norms such as the ISSB (International Sustainability Standards Board) and the EU’s CSRD (Corporate Sustainability Reporting Directive).

For companies — both domestic and international, this signals a major shift:

ESG compliance will no longer be optional or reputation-driven; it will become a formal, regulated part of doing business in China.

This article examines what the CSDS framework entails, how the reporting timeline unfolds, and what steps businesses should take now to stay ahead of the curve.

Table Of Content

China’s ESG Reforms: At a Glance

China is building a comprehensive sustainability reporting system that will fundamentally change how companies disclose non-financial performance. The Chinese Sustainability Disclosure Standards (CSDS) are at the heart of this framework—setting out how organisations must report on governance, environmental impact, and social responsibility in a consistent, verifiable way.

The following table summarises key milestones and what they mean for businesses operating in China:

Item	Status / Timeline	Notes for Businesses
ESG Reporting Guidelines on Stock Exchanges	Effective 1 May 2024	Listed and dual-listed companies must publish their first sustainability reports for the 2025 financial year by April 2026. Smaller firms are encouraged to disclose voluntarily.
CSDS – Basic Standard	Finalised December 2024	Provides the foundation for national sustainability disclosure, establishing general principles and baseline requirements. Voluntary adoption is open ahead of mandatory rollout.
CSDS – Thematic Standards (e.g. Climate)	Drafts issued April 2025	Introduces sector-specific topics such as climate impact, energy transition, and workforce practices. Closely reflects the global IFRS S2 climate reporting framework.
Mandatory Reporting Begins	April 2026, covering FY 2025	Initially applies to roughly 400 large listed companies across China’s major stock exchanges. Compliance will expand gradually.
Full CSDS Implementation	Targeted by 2030	The system will become fully operational across most sectors, including medium-sized enterprises and foreign-invested companies.

These reforms represent a decisive transition from voluntary sustainability statements to legally required ESG disclosures—a development every international business should prepare for.

Structure & Key Principles of the CSDS in China

Three-Tier Framework

The Chinese Sustainability Disclosure Standards (CSDS) have been designed as a layered framework to ensure clarity, flexibility, and progressive adoption.

The three components are:

Basic Standards – The overarching rules governing sustainability reporting. They define key principles around governance, strategic planning, risk management, and measurable performance indicators.
Thematic Standards— Detailed requirements for high-impact topics such as carbon emissions, biodiversity, social welfare, and water stewardship. These standards evolve by industry to reflect material risks and sectoral priorities.
Application Guidance— Practical documents that explain how companies can collect data, verify metrics, and implement reporting efficiently, often including case studies and recommended methodologies.

For example, the Climate Disclosure Standard (CSDS No. 1) — released in draft form in 2025—asks companies to disclose their carbon footprint, adaptation plans, and energy-transition pathways in alignment with global climate reporting norms.

Core Principles

The CSDS framework is guided by several defining principles:

Double Materiality— Firms must assess both how sustainability factors influence financial outcomes and how their activities affect society and the environment.
Alignment with International Frameworks – The structure draws inspiration from the International Sustainability Standards Board (ISSB) to ensure cross-border comparability.
Phased and Proportionate Roll-out – Implementation will be gradual, beginning with major listed companies before expanding to a wider base of enterprises.
Reliability and Verifiability – All reported data should be consistent, traceable, and supported by clear evidence to strengthen stakeholder trust.
Flexibility in Methodology – Organisations may choose reporting methods that suit their operational maturity, provided disclosures remain transparent and auditable.

Four-Pillar Disclosure Framework

China’s ESG system mirrors the familiar four-pillar structure adopted globally, ensuring consistency and comparability:

Governance – Board oversight, accountability structures, and ESG integration into decision-making.
Strategy – Identification of sustainability risks and opportunities and their impact on long-term value.
Risk and Opportunity Management – Processes for assessing, managing, and monitoring ESG-related risks.
Metrics and Targets – Quantifiable indicators to evaluate performance and progress against objectives.

Stock Exchanges and Regulatory Phases in China

Exchange-Level Requirements

In 2024, China’s three major stock exchanges—Shanghai (SSE), Shenzhen (SZSE), and Beijing (BSE)—jointly introduced new sustainability reporting rules.

These require:

Companies within major indices such as the SSE 180, STAR 50, SZSE 100, and ChiNext to issue sustainability reports for the 2025 financial year by 30 April 2026.
Dual-listed firms, trading both domestically and overseas, to comply with the same timeline.
Other listed companies follow these guidelines voluntarily to maintain market credibility.

At present, the Beijing Exchange continues to promote voluntary disclosures but is expected to adopt mandatory rules later in the decade.

Phased Implementation Timeline

Period	Focus Area	Expected Outcome
2024–2026	Pilot phase and voluntary adoption	Companies begin aligning existing reports to CSDS structure and build internal capacity.
2026	Mandatory reporting for major listed firms	First compulsory ESG reports due, covering FY 2025.
2027–2029	Thematic expansion	Industry-specific reporting standards (e.g. climate, water, labour) become binding.
2030	Nationwide compliance	CSDS becomes the standard ESG reporting framework across most sectors and company sizes.

By 2030, China aims to achieve a unified disclosure regime consistent with international ESG practices, creating a level playing field for domestic and multinational companies alike.

Practical Steps for Businesses in china for 2026

To prepare effectively, companies — particularly those with operations or partnerships in China — should take the following actions:

Conduct a Gap Assessment

Evaluate how current sustainability disclosures compare with CSDS expectations. Identify areas where data, governance processes, or controls require strengthening.

Build Data Infrastructure

Create integrated data systems that link operational, environmental, and financial metrics. Automation tools can improve reliability and traceability.

Design a Reporting Framework

Structure ESG disclosures around the four CSDS pillars. Pilot voluntary reporting before the 2026 deadline to test readiness.

Cross-Jurisdiction Alignment

For multinational entities, map the Chinese standards against international frameworks such as the EU CSRD or ISSB to ensure consistent global reporting.

Strengthen Governance and Oversight

Train leadership teams on ESG responsibilities and incorporate sustainability metrics into executive performance reviews.

Monitor Regulatory Updates

Stay informed through regular policy tracking and public consultations. China’s sustainability regulations are evolving rapidly, and early awareness will reduce compliance risk.

Read our guide on: China’s Payroll and Tax Information

Key Risks, Challenges and Mitigation for businesses in China

Challenge	Impact	Recommended Response
Inconsistent or incomplete ESG data	Reduced comparability and credibility.	Implement centralised data management and external verification..
Divergent global standards	Duplication of effort across markets	Harmonise KPIs and reporting templates.
Limited internal capacity	Strain on smaller subsidiaries	Provide training and shared-service ESG support.
Unclear regulatory details	Risk of misinterpretation	Engage local legal and advisory experts.
Supplier compliance gaps	Disruption to the reporting chain.	Incorporate ESG clauses in procurement contracts and monitor suppliers.

Opportunities and Strategic Advantages for Business in China

Although the CSDS brings compliance obligations, it also offers significant upside for early adopters:

Enhanced Investor Confidence – Consistent ESG reporting improves transparency and attracts responsible investment.
Access to Sustainable Finance – Banks are increasingly linking loan rates to ESG performance.
Operational Efficiency – Systematic tracking of resource use and emissions often reveals cost-saving opportunities.
Reputation and Trust – Transparent reporting differentiates brands in a competitive market.
First-Mover Advantage – Companies ready ahead of regulation may qualify for incentives and favourable financing conditions.

What to Watch in 2026 and Beyond

Publication of final thematic CSDS standards on climate, biodiversity, and social factors.
Emergence of third-party assurance requirements for ESG disclosures.
Gradual extension of reporting obligations to SMEs and private enterprises.
Rapid development of green finance instruments, including sustainability-linked bonds and loans.
Ongoing efforts to harmonise CSDS with global standards such as ISSB, CSRD, and the EU taxonomy.
Heightened scrutiny of greenwashing and false sustainability claims.

Stay Compliant with Our Services to Grow Your Team in China.

Conclusion

China’s move towards mandatory ESG reporting marks one of the most significant regulatory shifts in Asia’s corporate landscape.
While compliance will demand new systems, skills, and governance structures, it also presents an opportunity to build stronger, more transparent businesses aligned with global sustainability goals.

Practical next steps for companies:

Commission an ESG readiness review tailored to Chinese regulations.
Begin preparing a pilot sustainability report for FY 2025.
Align internal metrics with both CSDS and home-country standards.
Develop supplier engagement programmes to ensure data consistency.
Establish ongoing policy monitoring to track regulatory developments.

At Galaxy Group, we assist companies in transforming ESG compliance into a source of strategic advantage—from data architecture to disclosure readiness and stakeholder alignment.

Get ESG-Ready with Galaxy Group

Our advisory specialists help multinational and domestic companies build ESG reporting systems, align with CSDS standards, and navigate China’s 2026 sustainability mandates.

FAQ’S

When do China’s ESG reporting rules become mandatory?

The first mandatory reports—covering the 2025 financial year—are due by 30 April 2026.

Who must comply initially?

Large-cap and dual-listed firms on the Shanghai, Shenzhen, and Beijing stock exchanges.

What is “double materiality”?

It refers to assessing both how sustainability risks affect a company’s performance and how that company’s actions affect society and the environment.

Will smaller companies also need to comply?

Yes. While initially voluntary, small and medium-sized enterprises will gradually be included before 2030.

How do these rules align with global ESG standards?

China’s CSDS mirrors international frameworks such as ISSB (IFRS S1/S2) and Europe’s CSRD, promoting cross-border consistency.

What should multinational businesses do now?

Conduct a readiness audit, enhance ESG data systems, and align reporting with both CSDS and home-market standards.

Claiming Allowable Employment Expenses in Singapore

October 13, 2025 by chinki sharma

October 13, 2025

Claiming Allowable Employment Expenses in Singapore

In Singapore, employment costs are one of the biggest ongoing expenses for any business. But many companies overlook how these costs affect tax deductions and compliance with IRAS regulations.

Put simply, certain employee-related expenses can reduce your taxable income—provided they are directly tied to official work duties and properly documented. When properly classified and documented, they can lower taxable income, enhance financial efficiency, and support broader growth objectives. Conversely, errors in classification or poor record-keeping can lead to compliance breaches, penalties, and heightened audit risk.

This is where professional accounting services in Singapore play a pivotal role. Beyond processing accounts, experienced advisers ensure that deductible employment expenses are identified, claims are accurately filed, and organisations remain compliant with local tax laws. More importantly, they help transform what might seem like an administrative burden into a source of financial resilience and strategic advantage.

Table Of Content

Leveraging Employment Expenses for Strategic Advantage in Singapore

Singapore has long been recognised as one of the world’s most attractive hubs for cross-border business. Its competitive corporate tax rate of 17%, extensive network of tax treaties, and robust regulatory framework have made the city-state a preferred base for both multinational corporations and ambitious SMEs seeking regional expansion.

Yet to achieve true financial effectiveness, benefitting from a low corporate tax rate alone is insufficient.Companies must also understand and maximise allowable employment expenses—as defined by the Inland Revenue Authority of Singapore (IRAS)—which are costs incurred wholly, exclusively, and necessarily in the course of performing official duties.

When claimed appropriately and supported by proper documentation, allowable expenses provide three strategic benefits:

Tax optimization: Deductible costs reduce taxable profit, improving financial performance and cash flow.
Regulatory compliance: Adherence to IRAS standards minimises audit exposure, penalties, and disputes.
Employee engagement: Transparent recognition of legitimate work expenses reinforces fairness, boosting morale and retention.

For forward-looking CFOs, HR leaders, and finance teams, expense management is no longer a routine administrative function. It has become a strategic control mechanism—one that aligns financial discipline with compliance, while also enhancing employee relations. In cross-border operations, where tax, payroll, and accounting requirements vary widely, mastering this balance is especially vital.

Ultimately, organisations that treat compliance as a burden risk falling behind, while those that approach it as a competitive advantage can unlock both financial efficiency and long-term resilience.

What Are the Allowable Employment Expenses for Accounting Services in Singapore According to IRAS Guidelines?

In Singapore, the definition of an allowable employment expense is strictly governed by the Inland Revenue Authority of Singapore (IRAS). According to IRAS guidelines, a permissible expense refers to costs that are entirely, exclusively, and necessarily incurred in the course of performing official duties. Only expenses directly tied to employment duties are deductible, while personal or mixed-use costs are excluded.

Key Principles Under IRAS

Entirely business-related: The expense must have a clear and direct connection to employment duties. For example, a taxi ride to a client meeting qualifies, whereas daily commuting from home to the office does not.
Exclusively for employment purposes: The cost must not overlap with personal benefit. A subscription to a professional body relevant to one’s role is deductible, while a general lifestyle membership, such as a gym subscription, is not.
Essential for duties: The expense must be unavoidable in carrying out the role. For instance, additional electricity and Wi-Fi charges during work-from-home arrangements can be claimed if properly apportioned.

These principles are aligned with both IRAS regulations and professional references such as SCS-CPA and international accounting standards. Businesses should establish transparent spending guidelines, maintain robust records, and incorporate claims into payroll and tax reporting systems to remain compliant.

Importance of Documentation

IRAS places strong emphasis on maintaining proper records:

Claims must be supported by receipts, invoices, or bills.
Including a short note on the business purpose of each expense strengthens the claim.
Records must be kept for a minimum of five years to meet statutory requirements.

Why Strict Compliance Matters

Adhering to IRAS guidelines prevents unintentional overstatement of deductions, ensures that claims withstand IRAS reviews, and enhances financial governance. Clear expense policies, aligned with payroll and tax reporting platforms, reduce compliance risks and provide assurance during audits.

Allowable employment expenses can be a powerful way to optimise tax outcomes. However, this benefit is realised only when businesses consistently apply the IRAS framework and support each claim with credible documentation.

What Are the Categories of Allowable Employment Expenses in Singapore Accounting Services?

Singapore’s Inland Revenue Authority of Singapore (IRAS) has established specific categories of employment expenses that can be claimed, as long as they are incurred entirely, exclusively, and necessarily in the execution of official work. For businesses, these categories must be understood to ensure accuracy of claims, compliance, and reflection in payroll and accounting records.

Category	Description	Conditions under IRAS	Examples
Client Entertainment	Expenses incurred in hosting clients, suppliers, or business partners.	Must be directly related to business purposes. The employee’s own share of the cost must be excluded.	Business dinner with clients, excluding the employee’s portion of the bill.
Professional Subscriptions	Membership fees to recognised professional or industry bodies.	Must be directly relevant to the employee’s role and necessary for professional duties.	Annual membership to accounting, legal, or engineering associations.
Public Transport and Business Travel	Transport expenses for official business activities.	Only journeys undertaken for business purposes are deductible. Daily commuting between home and the office is not eligible for reimbursement.	Taxi to a client meeting or bus fare to an external training venue.
Work-from-Home (WFH) Expenses	Additional household costs incurred due to remote working arrangements.	Only incremental expenses are claimable. Claims must be substantiated with evidence, such as comparisons of bills before and during WFH periods.	Higher electricity bills or increased internet usage are directly linked to working from home.
Religious Dues	Singapore’s tax framework recognises specific contributions.	Only specific religious contributions qualify as allowable employment expenses.	Zakat fitrah or mosque building fund contributions.
Training, Uniforms, and Consumables	Job-related training, mandatory uniforms, and essential consumables.	The expense must be directly linked to the employee’s duties and required for work performance.	Skills-based training, protective clothing, stationery, and other necessary supplies.

Significance for Companies in Singapore

For a Singapore company, proper management of allowable employment expenses goes beyond tax optimisation. Accurate categorisation and documentation ensure compliance with IRAS, support audit readiness, and reduce the risk of penalties. For regional operations, where standards differ across markets, aligning expense management with robust accounting and tax services helps maintain consistent compliance and financial governance.

What Are Non-Allowable Employment Expenses in Singapore Accounting Services?

The IRAS specifies categories of expenses that cannot be claimed, to ensure only genuine business-related costs are deducted.

Non-Allowable Expense	Reason for Exclusion	Examples
Home-to-office commuting	Considered a personal cost, not directly related to business duties.	MRT fare from home to office, daily taxi to workplace.
Private vehicle expenses	Private car costs remain personal even if occasionally used for work.	Fuel, insurance, parking, maintenance.
Meals with colleagues	Classified as social or goodwill, not incurred wholly for business.	Lunch or dinner with co-workers without clients present.
Prospective client entertainment	Expenses incurred before a formal business relationship do not qualify.	Hosting meals or events for potential clients.
Penalties and fines	Regarded as personal liabilities rather than business-related costs.	Traffic fines, late payment penalties, and payment instead of notice.

Key Insight

Compliance is facilitated in Singapore companies by clearly differentiating allowables and non-allowables. Accurate categorisation aligns with the guidelines of IRAS, allows no room for argument during audit, and provides financial transparency in accounting and in tax reporting.

How to Calculate and Substantiate Claims with Professional Accounting & Tax Services

IRAS accepts a claim only if costs are accurately computed and supported by adequate records. Companies should adopt clear methods of cost apportionment and proper documentation to support compliance.

Work-from-Home (WFH) Cost Apportionment

Only additional household expenses incurred as a result of working from home are deductible.

Example:

Electricity bill before WFH: SGD 120
Electricity bill during WFH: SGD 160
Allowable claim: SGD 40 (incremental cost)

If more than one household member works from home, the claim must be divided fairly between them.

Documentation Requirements

To meet compliance standards, companies should:

Retain receipts, invoices, and bills for a minimum of five years.
Record the business purpose for each expense, such as “taxi fare to client meeting.”
Ensure expense claims are integrated with payroll and tax reporting systems to prevent duplication.
Note that IRAS will reject any claim without supporting evidence.

By applying consistent apportionment rules and maintaining proper documentation, a Singapore company can ensure its claims are defensible, reduce the risk of penalties, and demonstrate strong financial governance.

What Is the Filing Process for a Singapore Company with IRAS in Accounting Services?

Filing employment expenses in Singapore requires precision and adherence to IRAS requirements. The process generally includes the following steps:

1. Complete the Employment Expenses Schedule:

Record all allowable expenses using the prescribed IRAS format.

2. Attach the schedule to the annual income tax return:

Ensure that expense claims are consistent with reported income and financial records.

3. Provide supporting evidence if requested:

Retain receipts, invoices, and related documents to substantiate claims during a review.

4. Review the Notice of Assessment (NoA):

Verify that taxable income has been correctly adjusted to reflect the allowable deductions.

Integrating these steps into payroll and compliance workflows helps a Singapore company maintain efficiency, reduce the risk of errors, and remain prepared for potential audits.

Read Blog: Guide to Corporate Tax Filing in Singapore

How Do Allowable and Non-Allowable Employment Expenses Compare?

The table below summarises everyday employment expenses, highlighting which are deductible under IRAS rules and which are not.

Expense Type	Allowable	Not Allowable
Client Entertainment	Portion relating to clients or partners	Employee’s own share of the bill
Professional Subscriptions	Memberships directly linked to job duties	Unrelated or personal memberships
Public Transport & Travel	Travel to client meetings or business events	Daily commuting between home and office
Work-from-Home (WFH) Costs	Incremental expenses supported by bills	Base household costs
Religious Dues	Specific contributions recognised by IRAS	Other voluntary contributions
Training, Uniforms & Consumables	Work-related training, protective clothing, stationery	Personal clothing or unrelated training
Penalties & Fines	—	Always excluded

A clear distinction between allowable and non-allowable expenses reduces compliance risks and ensures accurate reporting in payroll and tax processes.

Compliance Risks and Reporting Pitfalls in Singapore Accounting Services

The main risks associated with misreporting employment expenses, their consequences, and the best practices companies should follow to remain compliant with IRAS requirements.

Risk	Description	Consequences	Best Practice
Overstated claims	Reporting amounts greater than actual receipts or invoices.	Upward revision of taxable income; possible penalties.	Cross-check claims against receipts and maintain approval checks to ensure accuracy.
Use of estimates	Submitting approximate figures instead of actual documented expenses.	Disallowed claims increase the likelihood of an IRAS review.	Only accept claims supported by bills and invoices.
Duplicate claims	Deducting expenses already reimbursed by the employer.	Disqualification of claims; potential fines.	Integrate expense systems with payroll to prevent duplication.
Insufficient records	Failing to retain receipts, invoices, or notes for business purposes.	Claims rejected; exposure to audits and penalties.	Retain documentation for at least five years; require purpose notes on expenses.

By recognising these risks and implementing preventive measures, a Singapore company can maintain compliance, avoid unnecessary penalties, and strengthen overall financial governance.

Conclusion

Effective management of employment expenses is a crucial aspect of conducting business in Singapore. When companies apply IRAS guidelines correctly—by identifying allowable expenses, excluding non-deductible items, and maintaining proper documentation—they achieve greater tax efficiency while reducing compliance risks. This not only strengthens financial governance but also ensures readiness in the event of regulatory review.

Given the complexity of aligning expense management with payroll, taxation, and cross-border operations, many organisations choose to work with experienced partners.

Galaxy Group supports companies in this area by providing expertise in accounting and tax services, payroll administration, and compliance advisory. With this support, businesses can be confident that expense claims are managed in accordance with IRAS requirements and integrated seamlessly into broader financial processes.

For leadership teams, engaging Galaxy Group offers more than compliance assurance. It provides the foundation for sustainable growth across Singapore and the wider APAC region by ensuring that financial and regulatory obligations are met with precision and consistency.

Ensure Compliance, Optimise Efficiency

Partner with Galaxy APAC for trusted accounting and tax services in Singapore and across APAC.

FAQ’S

Why is income still taxable if it was repaid to the employer after a breach of contract?

Employment income is taxable once it has been earned for services rendered. Any repayment to the employer due to a breach of contract is treated separately as compensation and is regarded as a personal expense, which does not qualify for tax deduction.

Can fees paid to the Employability & Employment Centre (E2C) programme be claimed as employment expenses?

Support fees paid to the E2C programme may be deductible if participation in the programme occurred prior to employment and the subsequent role was secured through the programme. Proof of payment and placement is required.

Are payments in lieu of notice deductible from taxable income?

Payments in place of notice are regarded as personal liabilities under an employment contract. They are not recognised as deductible expenses for tax purposes.

Are expenses for private vehicle usage allowable as employment expenses?

Private vehicle expenses, such as fuel, insurance, parking, and maintenance, are considered personal in nature. These costs are not deductible, even if the vehicle is occasionally used for business purposes.

Can training costs be deducted from taxable income?

Training costs are deductible only when directly related to current employment duties. Courses intended for personal development, career changes, or unrelated skill sets do not qualify as allowable expenses.

Startup Payroll Simplified: 11 Must-Know Tips for Founders

October 10, 2025 by galaxy

October 10, 2025

Startup Payroll Simplified: 11 Must-Know Tips for Founders

In today’s global business landscape, payroll has evolved into a strategic lever for credibility and growth. For start-ups expanding across Asia-Pacific (APAC), the challenge extends far beyond salary disbursement. It requires navigating diverse labour regulations, cross-border taxation, and benefits administration with precision. A single error can compromise compliance, delay operations, and erode trust among employees and investors.

Establishing a structured, future-ready payroll system is therefore not merely an operational necessity but a defining marker of sound governance and sustainable expansion.

This guide provides a region-specific framework for establishing compliant and scalable payroll dynamics. It highlights current trends in workforce management and the strategic role of Employer of Record (EOR) solutions, offering practical guidance for companies expanding into key APAC jurisdictions.

Table Of Content

Why Payroll Needs a Founder’s Attention from Day One?

A compliant and well-structured payroll system is fundamental to organisational credibility, yet it is frequently overlooked during the early stages of planning. Payroll extends beyond the distribution of salaries; it serves as the foundation for legal compliance, employee confidence, and sustainable growth.

Risks of Poor Payroll Management

Employee dissatisfaction with delayed or inaccurate payments
Regulatory penalties arising from non-compliance
Investor concerns during audits and due diligence processes

Strategic Benefits of Early Payroll Integration

Advantage	Outcome
Seamless onboarding	Compliant hiring from day one
Clean financial reporting	Credibility with investors and regulators
Scalable operations	Quick entry into new markets with built-in compliance
Lower legal exposure	Reduced risk of violations and disputes

In fast-growing markets, particularly across the APAC region, founders must treat payroll management as a strategic priority. Done right, it ensures business continuity, investor confidence, and operational readiness from the start.

Read Our Blog: Should a Small Business Outsource its Payroll Function?

3 Things Founders Must Know About Global Payroll Management in APAC

As start-ups scale into the Asia-Pacific (APAC) region, payroll quickly shifts from a back-office process to a strategic priority. Each market presents unique requirements that, if mishandled, can affect compliance, cash flow, and credibility. Founders should focus on three critical areas:

1. Regulations Vary Widely

Unlike operating within a single domestic framework, payroll in APAC requires navigating multiple tax structures, labour laws, and statutory obligations.

For example, Singapore mandates contributions to the Central Provident Fund (CPF), whereas Hong Kong does not have a mandatory social security system but does enforce the Mandatory Provident Fund (MPF). Vietnam, on the other hand, has strict rules around minimum wage and compulsory insurance. Failing to understand and apply these local requirements can quickly result in fines or regulatory scrutiny.

2. Compliance Drives Credibility

Payroll is directly tied to trust—both from employees and from investors. A missed salary payment, an incorrect tax filing, or non-compliance with local regulations can cause significant reputational damage.

For instance, late or inaccurate contributions in Singapore can lead to penalties, while in markets like the Philippines, the Department of Labour and Employment (DOLE) actively audits companies for payroll violations. Founders who prioritise compliant payroll systems signal professionalism, stability, and readiness for growth.

3. Strategy Matters

Payroll management reactively across different jurisdictions is neither scalable nor sustainable. A unified payroll strategy—supported by reliable systems or Employer of Record (EOR) solutions—ensures consistency, accuracy, and transparency across borders. This not only reduces the risk of human error but also helps founders plan for growth, manage costs effectively, and create a seamless employee experience across diverse markets.

How Does Payroll Complexity Vary Across APAC?

Country	Statutory Components	Payroll Challenges
Singapore	CPF, Income Tax, SDL	CPF accuracy, leave compliance
Hong Kong	MPF, Salaries Tax	MPF limits, annual filings
China	Social Insurance, Housing Fund, IIT	City-level rules, complex thresholds
Taiwan	Labour & Health Insurance, Pension	Dual contributions, monthly reporting
Macau	Social Security, Professional Tax	Foreign worker permits, tax exemptions
Vietnam	Social Insurance, Trade Union Fees	Regional wages, contract classifications
Thailand	Social Security, Personal Income Tax	Tiered tax, expat compliance
Philippines	SSS, PhilHealth, PAG-IBIG, 13th-Month Pay	Regional codes, benefit remittances
Japan	Health, Pension, Unemployment Insurance	Multiple deductions, complex schedules

The Cost of Non-Compliance

Errors in payroll filings or compensation can lead to regulatory penalties, business disruption, and reputational harm. In emerging markets, such missteps also affect employee retention and morale.

Strategic Consideration

Payroll is not just an operational function—it is a critical compliance framework. For companies expanding across APAC, access to local expertise and a market-specific payroll structure is essential to managing risk and supporting long-term growth.

EOR as a Fast-Track Strategy for Market Entry and Workforce Expansion

Operational efficiency, speed, and compliance are essential when entering new markets. The Employer of Record (EOR) model enables businesses to build a local workforce without the time and complexity of setting up a legal entity. As the legal employer, an EOR manages employment contracts, payroll, statutory contributions, social security, and tax compliance, allowing companies to engage talent seamlessly while retaining complete operational control.

When to Consider the EOR Model

Entry into a new market without a registered business entity
Employment in countries with complicated or unclear labour laws
Quick expansion into target markets
International short-term or project-based assignments

Strategic Benefits of the EOR Payroll Model

Benefit	Description
Accelerated Hiring	Talent can be onboarded within 1–2 weeks, enabling faster market activation.
Reduced Overhead	Eliminates the need to establish a legal entity, lowering entry barriers.
Risk Mitigation	Ensures compliance with local tax, labour, and statutory regulations.
Resource Efficiency	Internal teams remain focused on core operations rather than administrative tasks.

The EOR payroll model has become a practical solution for globally minded organisations seeking flexibility, speed, and compliance as they expand into new markets.

11 Must-Know Payroll Practices for Managing Operations

Managing payroll across Asia-Pacific requires strict compliance with local regulations, precise administration, and sensitivity to regional labour standards. The following practices are critical to maintaining legal integrity and operational efficiency.

1. Understand Local Statutory Requirements

Each APAC jurisdiction enforces specific payroll obligations, including deductions, employer contributions, and statutory filings.

Singapore: Central Provident Fund (CPF), Skills Development Levy (SDL), IRAS tax filings
Japan: Health insurance, pension, and unemployment contributions
Philippines: SSS, PhilHealth, PAG-IBIG Fund, 13th-month pay obligations

In-depth local knowledge is essential to ensure accuracy and avoid penalties.

2. Align Payroll with Local Holidays and Pay Cycles

Payroll schedules must reflect public holidays and banking practices.

Vietnam: Tet (Lunar New Year) often causes prolonged closures
Japan: Golden Week impacts payroll operations and remittances

Alignment avoids late payments and contractual breaches.

3. Implement FX-Optimised, Multi-Currency Payroll Systems

Cross-border operations often require salary disbursements in multiple currencies. Use platforms that provide:

Competitive exchange rates
Reduced transaction costs
Timely and traceable transfers

Such systems ensure payroll consistency and financial control.

4. Automate Tax Calculations and Statutory Filings

Automation reduces the risk of manual errors and non-compliance.

Apply jurisdiction-specific tax rates and thresholds
File returns to local authorities on time
Generate compliant records for audit purposes

Automation supports both accuracy and regulatory adherence.

5. Integrate Time and Leave Management

Payroll accuracy relies on real-time attendance and leave tracking.

Sync systems with national calendars and rest day regulations
Record overtime and time-off requests
Calculate entitlements like holiday pay and shift differentials

This integration improves transparency and payroll integrity.

6. Stay Updated on Regulatory Changes

Labour laws in jurisdictions such as China and Indonesia are subject to frequent changes. To remain compliant:

Monitor updates from labour ministries and official gazettes
Engage local advisors to assess policy impact
Update payroll systems and practices regularly

Proactive compliance reduces risk exposure.

7. Offer Statutory and Competitive Benefits

Beyond legal minimums, enhanced benefits support retention and employer brand value.

Group health insurance
Wellness or mobility allowances
Learning and development reimbursements

Market-aligned packages improve workforce satisfaction and reduce attrition.

8. Enforce Data Privacy and Security

Payroll data must comply with local data protection laws and regulations.

Singapore: Personal Data Protection Act (PDPA)
Philippines: Data Privacy Act of 2012
China: Personal Information Protection Law (PIPL)

Use encrypted systems, restrict access, and maintain internal audit trails.

9. Handle Exits and Final Settlements Carefully

Offboarding must comply with jurisdiction-specific rules.

Honour notice periods and severance formulas
Settle unused leave and outstanding dues
Deliver accurate final payslips and required documents promptly

Proper handling mitigates legal and reputational risks.

10. Maintain Payslip Accuracy and Transparency

Payslips should include all mandatory and company-specific components:

Gross pay and fixed allowances
Tax and statutory deductions
Employer contributions
Net payable salary and benefit accruals

Clear payslips foster compliance and trust.

11. Localise Employment Contracts

Standardised templates are insufficient across jurisdictions. Contracts should:

Reflect local wage structures, working hours, and leave laws
Define enforceable terms for termination and dispute resolution
Align with region-specific statutory clauses and employment codes

Tailored contracts ensure legal enforceability and reduce litigation risks.

Streamlined Global Growth with EOR Support

Employer of Record (EOR) solutions enable companies to establish a compliant workforce in new markets without the need to set up a local legal entity. By overseeing all employment obligations in line with local regulations, EORs simplify cross-border operations and ensure seamless compliance.

Key Capabilities

Local Onboarding

Manages recruitment processes, background verifications, and documentation in accordance with local hiring practices.

Use contracts and human resource policies

Prepares jurisdictional agreements and company policy in a legally appropriate format and language.

Grant of Statutory Benefits

Empowers precise registration and continuous fulfilment of compulsory insurance, pension, and social security programs.

Compliant Offboarding

Handles terminations, final payments, and statutory clearances in line with local employment laws, ensuring legal and procedural integrity.

By consolidating these critical functions, EOR services enable companies to scale globally with reduced risk and greater operational efficiency.

Choosing the Right Global Payroll Provider: A Founder’s Checklist

A payroll solutions provider should deliver far more than salary processing. It must safeguard compliance, integrate seamlessly with existing systems, and provide consistency across borders. The checklist below highlights the essential criteria for evaluating and selecting a dependable global payroll provider.

Key Evaluation Criteria

Category	What to Look For
Geographic Coverage	Ensure the provider operates in all the markets you wish to expand into, such as Singapore, Japan, Vietnam, China, and others that align with your plans.
Regulatory Compliance	Ensure they handle payroll tax filings, statutory contributions, employment contract vetting, and country-specific labour laws.
System Integration	Check whether their platform integrates smoothly with your existing HR, finance, and time-tracking systems.
Pricing Transparency	Look over the whole pricing structure ahead of time, paying special attention to the fees for compliance management, onboarding, and foreign exchange.
Employee Support	Assess the level of assistance provided to staff members, including helpdesk services, local HR documentation, and onboarding support.
Exit Handling	Ensure the provider complies with local laws regarding notice periods, final compensation, and statutory clearances when handling offboarding procedures.

conclusion

Payroll is a cornerstone of sound governance, particularly in regions such as the Asia-Pacific, where regulatory frameworks are complex and continually evolving. For founders, building a scalable and compliant payroll system is critical to retaining talent, mitigating risk, and driving sustainable growth.

Employer of Record (EOR) solutions offer a strategic advantage—allowing start-ups to expand into new markets quickly, without the delays and administrative burden of setting up local entities, while remaining fully compliant with employment laws.

At Galaxy Payroll Group, we support start-ups and global organisations with end-to-end global payroll solutions, EOR services, and compliance solutions across nine key markets. With deep local expertise and integrated systems, we empower founders to scale confidently, reduce risk exposure, and focus on growing their businesses.

Ready to Simplify Payroll Across APAC?

With Galaxy Group taking care of compliance, payroll, and onboarding, you’re free to focus on growing your business.

FAQ’S

What does an Employer of Record (EOR) do?

An EOR acts as the legal employer in another country. They handle contracts, payroll, benefits, and compliance so you can expand without setting up a local company.

How does an EOR help with market entry?

An EOR lets you hire local talent quickly and legally. This cuts down on setup time, paperwork, and risks when entering new markets.

How is an EOR different from hiring contractors?

EORs provide full, compliant employment with benefits and taxes managed. Contractors may risk misclassification and are better suited for short-term work.

How fast can I hire through an EOR?

Usually within 1–2 weeks, depending on the country, thanks to the EOR’s ready-made legal and HR setup.

What should I look for in an EOR provider?

Check their global coverage, compliance strength, HR/payroll integration, transparent pricing, and local employee support.

Understanding Hong Kong Salaries Tax for Businesses

October 7, 2025 by galaxy

October 7, 2025

Understanding Hong Kong Salaries Tax for Businesses

Hong Kong is recognised as one of Asia’s most efficient and transparent tax jurisdictions, offering a stable and business-friendly environment for international enterprises. Its straightforward framework is designed to foster growth, minimise administrative burden, and provide clarity for both employers and employees. For multinational organisations, particularly those managing expatriate assignments or cross-border payroll, understanding the salaries tax regime is critical to effective remuneration planning and workforce strategy.

Accurate and timely compliance is not only a legal obligation but also central to operational efficiency and corporate reputation. Missteps can result in penalties and unnecessary costs, while a well-informed approach—often supported by professional accounting & tax service providers—enables companies to optimise compensation packages and remain fully aligned with statutory requirements. This guide provides a detailed overview of Hong Kong’s salaries tax system, including assessment methods, applicable rates, taxable income categories, and key compliance considerations for international employers.

Table Of Content

Why Hong Kong’s Tax System Appeals to Foreign Businesses?

Multinational corporations often establish operations in Asia, with Hong Kong a preferred choice due to its reputation as one of the region’s most stable and efficient tax jurisdictions. Its tax framework is built on clarity and predictability—qualities highly valued by international employers managing regional headquarters or overseeing cross-border payroll.

Territorial Taxation Model

Dividends, capital gains, and income derived from sources outside the country are exempt from taxes.
Tax liability is limited to income that arises in or is derived from Hong Kong.
For businesses with globally mobile employees, this strategy significantly lowers international tax exposure and streamlines administration.

Absence of Indirect Personal Taxes

There is no capital gains tax, estate duty, value-added tax (VAT), or general sales tax.
The resulting tax burden on individuals is limited and predictable.
Employers benefit from streamlined compensation planning and fewer compliance requirements.

Low and Competitive Tax Rates

The maximum salary tax rate is capped at 17%.
Individuals are assessed under both progressive and standard methods, with the Inland Revenue Department applying the calculation that results in the lower tax liability.
This system enhances efficiency across a wide range of income levels.

Stable Legal and Regulatory Framework

Tax legislation in Hong Kong is consistent and rarely subject to sudden amendment.
This predictability enables accurate payroll forecasting, long-term financial planning, and operational stability.
Businesses are better positioned to manage risk and ensure continuity in workforce planning.

Efficient, Employer-Oriented Tax Administration

The Inland Revenue Department provides structured, digital processes for tax filings and documentation.
Employers are supported through clear guidance and procedural transparency.
The system includes automated selection of the most favourable tax computation method for the employee, reducing manual intervention.

Strategic Positioning for Regional Operations

Hong Kong’s tax framework supports organisations managing regional functions, including mobile teams and expatriate personnel.
It enables centralised payroll management and simplifies deployment across Asia-Pacific jurisdictions.

These elements collectively position Hong Kong as one of the most commercially advantageous tax environments for international business. Its well-defined legal structure and administrative efficiency provide the clarity required for strategic growth while supporting compliance and cost control across regional operations.

Overview of Salaries Tax in Hong Kong

In Hong Kong, wage taxation is linked to employment income, office work (including directorships), and pensions earned within the jurisdiction. The taxation is territorial, meaning that only income earned from services rendered in Hong Kong is subject to taxation. Employment income earned outside the jurisdiction is outside taxation, irrespective of whether the taxpayer is a tax resident or not. Territoriality forms the bedrock of Hong Kong as a world-class international business and taxation hub, making it a prime focus area for firms offering accounting & tax services to global businesses.

Categories of Taxable Income

The scope of salaries tax is comprehensive, covering various forms of remuneration and employment-related benefits. Income commonly subject to tax includes:

Salaries, Wages, and Bonuses

Regular pay, performance incentives, commissions, gratuities, and overtime payments fall within this category.

Cash and Non-Cash Benefits

Benefits such as housing, transport, education allowances, and other perks provided as part of the employment package are assessable.

Employer-Provided Housing or Housing Allowance

Where the employer or a housing allowance provides accommodation, a notional rental value is assessed and added to the employee’s taxable income.

Excess Contributions to Retirement Schemes

Employer contributions that exceed statutory limits under the Mandatory Provident Fund (MPF) or the Occupational Retirement Schemes Ordinance (ORSO) are considered taxable income.

Equity-Based Compensation

Share options and stock awards are taxed at the time of vesting or exercise, in accordance with the relevant provisions.

Key Exemptions and Administrative Rules

60-Day Rule

Employees who spend 60 days or fewer in Hong Kong during the assessment year are generally exempt from salaries tax. This exemption does not extend to directors or airline crew, who are taxed regardless of physical presence.

Director’s Fees

Fees paid to directors are taxable if the company is centrally managed or controlled from Hong Kong, regardless of whether the duties are carried out abroad.

Offshore Employment Relief

Employees with offshore employment arrangements may be eligible for partial exemption, depending on the number of days spent working outside Hong Kong. This requires substantiation through employment contracts, travel logs, and payroll records.

Employer Responsibilities

Employers in Hong Kong must ensure accurate classification of income, proper remuneration structuring, and full compliance with tax reporting requirements. Penalties, a reevaluation of tax obligations, or damage to one’s reputation may result from incorrect income classification or failure to maintain proper records.

To meet regulatory standards, it is essential to maintain clearly drafted employment contracts, ensure consistency in payroll processing, and accurately report all forms of employee compensation. Adhering to these requirements supports compliance with the Inland Revenue Department and helps maintain operational and reputational integrity in a competitive business environment.

How Are Salaries Tax Calculated and Applied in Hong Kong for 2025/26?

In Hong Kong, there are two methods for calculating salary tax, and each technique is used in every instance. After calculating the liability under each method, the Inland Revenue Department (IRD) selects the one that results in the lowest tax amount. The purpose of this dual-method structure is to expedite the administrative process and guarantee equity across income levels.

1. Progressive Rate Assessment

This method is based on an individual’s Net Chargeable Income, which is calculated as:

Total Employment Income − Allowable Deductions − Personal Allowances

According to Gov.hk, the official website of the Hong Kong government, the applicable progressive tax bands for the 2025/26 year are as follows:

Net Chargeable Income (HKD)	Tax Rate
First 50,000	2%
Next 50,000	6%
Next 50,000	10%
Next 50,000	14%
Remainder	17%

Our quick guide on : Effective Taxation & Tax Planning Strategies for Businesses in Hong Kong

This method typically benefits individuals who qualify for multiple deductions and personal allowances.

2. Standard Rate Assessment

The standard rate applies to Net Assessable Income, calculated as:

Total Employment Income − Allowable Deductions

Under this method, personal allowances are not deducted. The flat tax rates, as stated by Gov.hk, are as follows:

15% on the first HKD 5 million of net assessable income
16% on any amount exceeding HKD 5 million

This calculation method often applies to high-income earners whose available deductions and allowances are minimal.

Practical Illustration of Tax Calculation

Referencing the official tax guide issued by the IRD, consider an individual earning HKD 800,000 per annum, with allowable deductions of HKD 100,000 and personal allowances amounting to HKD 132,000.

Progressive Rate Method:

Net Chargeable Income = 800,000 − 100,000 − 132,000 = HKD 568,000
The tax would be calculated as follows:

First 50,000 @ 2% = 1,000
Next 50,000 @ 6% = 3,000
Next 50,000 @ 10% = 5,000
Next 50,000 @ 14% = 7,000
Remaining 368,000 @ 17% = 62,560
Total Tax = HKD 78,560

Standard Rate Method:

Net Assessable Income = 800,000 − 100,000 = HKD 700,000
Tax at 15% = HKD 105,000

In this scenario, the progressive rate method results in a lower tax liability and would therefore be applied.

Considerations for Employers

For employers managing local or regional payroll in Hong Kong, it is essential to understand how these tax calculations impact net salary, benefits structuring, and total compensation costs. Proper classification of income and adequate documentation of deductions ensure accurate assessment and compliance with local tax laws.
Engaging reliable tax and accounting services or consulting with a specialised tax and accounting firm can support accurate payroll processing and align operations with the current framework for tax compliance in Hong Kong. This is particularly important for multinational organisations that manage employee assignments across borders or offer equity-based compensation.

What Allowances and Deductions Apply Under Salaries Tax in Hong Kong?

To reduce the tax burden on its residents, Hong Kong’s tax system offers several exemptions and deductions. Employees who have dependents, housing expenses, retirement costs, and educational expenses all benefit from them.

As per the Inland Revenue Department (IRD) in its official reports, i.e., the Personal Allowances Table and Taxpayer Pamphlets, the following reliefs are available in the year of assessment 2025/26:

Personal Allowances (2025/26)

Allowance Type	Amount (HKD)
Basic Allowance	132,000
Married Person’s Allowance	264,000
Child Allowance (per child)	130,000 / 260,000 (year of birth)
Dependent Parent (aged 60+)	100,000 (co-residing) / 50,000 (not)
Disabled Dependant Allowance	75,000
Single Parent Allowance	132,000

These allowances serve to recognise familial responsibilities and provide financial relief to taxpayers supporting immediate or extended family members.

Deductible Expenses

Apart from allowances, individuals are also permitted to claim deductions for specific types of expenses incurred during the tax year. The highest amounts deductible in 2025/26 are:

Deduction Type	Maximum Deduction (HKD)
Home Loan Interest	100,000 – 120,000
Elderly Residential Care Expenses	100,000
Self-Education Expenses	100,000
Mandatory Provident Fund (MPF)	18,000
Voluntary MPF / Deferred Annuities	Up to 60,000 (combined)
Domestic Rent	100,000 – 120,000
Assisted Reproductive Treatment	100,000

All deduction claims must be substantiated with appropriate documentation, such as tenancy agreements, medical receipts, proof of tuition fees, or official MPF contribution statements.

For employers, particularly those managing payroll obligations for diverse employee profiles, it is essential to remain current with the latest IRD guidance. Integrating applicable allowances and deductions into salary structuring ensures complete alignment with local regulations and supports effective tax compliance in Hong Kong.

What Should Multinational Employers Know About Salaries Tax Compliance in Hong Kong?

To ensure full compliance with tax law in Hong Kong, multinational employers need to adopt the following best practices:

1. One must ensure the source of income.

Taxability will be based on where the employment contract is performed, where compensation is paid, and the employer’s principal place of business.

2. Use the 60-Day Exemption.

Workers physically on duty in Hong Kong for no more than 60 days in a year can be exempted. Proper travel records are required.

3. Properly State Director’s Fees

Director’s fees are tax-deductible if the company is centrally controlled in Hong Kong, even if duties are exercised elsewhere.

4. Provide Equity Compensation

Stock awards and stock options are taxed when they vest or when they are exercised. They must be valued appropriately and reported.

5. Keep Documentation

Employees are reminded to keep supporting documents for deductions and allowances, such as lease contracts, MPF statements, and receipts.

6. Track Budget Adjustments

Yearly budgetary adjustments can impact tax bands, allowances, or introduce reliefs. Keeping abreast allows for genuine payroll planning.

Hiring the services of a professional tax and accounting company, or procuring reliable tax and accounting services, is key to ensuring compliance, avoiding risks, and keeping pace with the changing Hong Kong payroll requirements.

Conclusion

Hong Kong has one of the best-articulated and most beneficial tax regimes in the Asia-Pacific. The imposition of salary tax liabilities, however, requires careful operation and comprehensive knowledge of prevailing regulatory conditions. This includes the proper determination of income classification, the accurate application of deductions, and strict compliance with annual legislative changes.

For international businesses managing regional payrolls or expatriate workforces, the complexity of cross-border compliance requires more than internal oversight. It calls for experienced, jurisdiction-specific support.

Galaxy Payroll Group offers integrated payroll, taxation, and compliance solutions designed for companies operating in Hong Kong and across the region. With established local expertise and a practical understanding of tax administration, Galaxy ensures employers remain compliant, well-prepared, and free to focus on their core business objectives.

Streamline Your Hong Kong Payroll Strategy

Avoid penalties and streamline operations with local expertise in salaries tax and employer obligations.

FAQ’S

What income is subject to salaries tax in Hong Kong?

Salaries tax applies to income earned from employment, office (such as directorships), and pensions arising in or derived from Hong Kong. Foreign-sourced income is not taxable.

What are the salaries tax rates in Hong Kong for 2025/26?

Salaries Tax rates in Hong Kong are calculated under two methods, with the lower amount applied:

Progressive rates up to 17% on net chargeable income
Standard rates of 15% (up to HKD 5 million) and 16% (above HKD 5 million)

Who qualifies for the 60-day exemption rule in Hong Kong?

Individuals present in Hong Kong for 60 days or less during the tax year may be exempt, unless they are company directors or members of the airline crew.

What deductions and allowances can reduce salary tax in Hong Kong?

Taxpayers may claim allowances for dependents, housing, and education, as well as deductions for home loan interest, MPF contributions, voluntary annuities, and domestic rent.

Is tax relief available for income taxed overseas?

Yes. A tax credit may be claimed for foreign income taxed in jurisdictions with which Hong Kong has a double tax treaty, provided that proper documentation is submitted.

China Global Payroll and Tax Information Guide

September 30, 2025 by digitalgowhere

September 30, 2025

China Global Payroll and Tax Information Guide

China remains the world’s largest and most dynamic labour market, attracting both multinational corporations and fast-growing SMEs. Payroll management here is far more than wage disbursement; it requires navigating complex labour laws, multi-tiered tax systems, and human resource practices that differ across provinces and industries.

In 2025, rising labour costs, stricter compliance requirements, and the growing use of digital technologies in finance and HR will make payroll management even more demanding, requiring businesses to balance regulatory precision with operational efficiency while respecting local workplace culture.

For companies establishing local entities or managing cross-border teams, accurate and compliant payroll is critical to efficiency, employee trust, and sustainable growth. This guide outlines the essentials of payroll in China, including updates on the minimum wage, employee benefits, tax compliance, cross-border payroll solutions, and the development of a resilient and scalable payroll framework.

Table Of Content

What Are the Core Components of Payroll in China?

China’s payroll system is built on numerous compulsory elements that all employers must handle with precision and timeliness to avoid non-compliance and to gain workers’ trust. They are not just statutory requirements; they form the pillar of fair and open employment policies.

Individual Income Tax (IIT)

Applied with progressive rates of taxation, income levels, deductibility, and exempt amounts are periodically revised by the authorities. Employers are required to correctly compute and deposit on time to avoid penalties and remain in compliance.

Mandatory Employer Contributions

Social insurance contributions for pension, unemployment, medical, maternity, and work-injury insurance. The schemes are designed to serve employee interests and are an integral part of China’s labour system.

Housing Fund

A compulsory saving plan contributed to by employers and employees in equal amounts, used for employees to purchase housing. Differing rates in various cities necessitate knowledge of local regulations.

Allowances and Bonuses

Transport allowances, meal allowances, and annual bonuses are standard, but must be disclosed as taxable income. The structuring of rewards must be done with care to ensure maximum staff satisfaction and tax efficiency.

Since each of these variables is regulated both nationally and provincially, payroll procedures must be tailored to the particular province or municipality in which its employees are located. For global employers operating in multiple jurisdictions, complexity is even more daunting, making a well-researched and locally compliant payroll strategy essential.

What Should You Know About Core Minimum Wage in China 2025?

China’s 2025 minimum wage remains region-based, with locally set rates that correspond to local living expenses and economic conditions. Tier-1 cities have the highest rates, and other towns continuously adjust their rates to remain competitive. Employers feel the effects of these payroll budget adjustments, overtime rates, and benefits planning—so regular monitoring is imperative for compliance and a strong employer reputation.

Category	Key Insight
Decentralised Wage Setting	China’s minimum wages are set locally—by province, city, or district—so that local living costs and economic conditions can be accommodated.
2025 Wage Range	The lowest monthly wages range from RMB 1,690 to RMB 2,690 (approximately USD 235–370), indicating significant regional disparities.
Most Regions Above RMB 2,000	By mid-2025, almost all the regions will have top-level minimum wages above RMB 2,000, suggesting a general increase in labour costs.
Lowest Wage Regions	Several areas made adjustments to their pay scales in the first half of 2025, demonstrating a proactive approach to balancing rewards with changing market circumstances.
Frequent Annual Adjustments	To employers, these variations have immediate effects on payroll budgets, overtime compensation, and talent management—rendering local regulatory knowledge critical.
Business Impact	For employers, these differences directly influence payroll budgets, overtime rates, and talent planning—making local compliance expertise essential.

Our quick guide on : Minimum Wage Trends in 2025 : A Comprehensive Global Overview

Employee Benefits Management in China: Key Insights for Employers

Employee benefits management in China is both a compliance necessity and a key talent retention strategy. Companies must strike a balance between the benefits of compliance and competitive advantages to attract and retain top talent.

1. Statutory Benefits:

China’s legal system requires inputs to:

Five Social Insurances – Pension, Medical, Unemployment, Work Injury, Maternity
Housing Provident Fund – For employees’ housing needs

Note: Regional contribution rates and calculation methods differ and are revised annually.

2. Extra Advantages:

Most employers exceed the law by providing:

Private health insurance
Transportation allowances
Subsidised meals
Regular health screenings.
Professional development programs

3. Best Practices for Employers:

Stay up to date with national and state laws
Integrate payroll systems to provide accurate and timely contributions.
Balance compliance with appeal by offering benefits that reflect market expectations

Why it matters:

A well-designed benefits strategy will enhance employees’ satisfaction, foster loyalty, and facilitate smooth operations—essential for both domestic and multinational corporations in China.

What Are the Key Rules for Employers on Tax in China?

Corporate Income Tax (CIT):

The standard rate is 25%.
Reduced rates are available for eligible High and New Technology Enterprises (HNTEs) and Small and Low-Profit Enterprises (SLPEs), typically at a rate of 15% or lower.
Qualification depends on strict adherence to and accurate reporting of standards.

Individual Income Tax (IIT):

Employers must calculate and withhold IIT on a monthly basis.
Tax rates range from 3% to 45% based on income.
Annual reconciliation is required for high earners.
The tax treatment for foreign employees is based on their residency status and the length of their stay.

Taxable Benefits:

Non-salary perks such as housing, education, and transport may be partially or fully taxable.
Certain expatriate benefits may be exempt if properly structured and supported with documentation.
Inaccurate reporting can result in fines and compliance risks.

Withholding Tax on Cross-Border Payments:

Royalties, dividends, and service payments to overseas entities are subject to withholding tax, typically ranging from 10% to 20%.
Tax treaty relief may be available if the correct documentation is submitted, including proof of tax residency.

Recordkeeping and Audits:

Employers must retain tax and payroll records for a minimum of 10 years.
All filings must be processed through China’s Golden Tax System.
Compliance includes maintaining Mandarin-language contracts and valid fapiaos.
Companies should be prepared for audits by local tax authorities.

Note: Maintaining full compliance with China’s tax laws is crucial for ensuring operational continuity, protecting reputation, and maintaining financial accuracy. Local expertise is highly recommended for effectively managing these obligations.

How Does Tax Compliance in China Affect Payroll Management?

Payroll and tax management in China demands coordinated oversight across regulatory compliance, cross-border payroll execution, and international tax planning. Each function carries distinct legal obligations and operational considerations. The table below outlines key focus areas businesses must address to ensure full compliance, maintain efficiency, and support sustainable growth in the Chinese market:

Compliance Focus	Tax Compliance	Cross-Border Payroll	International Tax Strategy
Regulatory Filings	Monthly IIT and statutory contributions must be filed accurately and on time	Salary payments in RMB and foreign currencies require adherence to foreign exchange controls	Entity type (WFOE, JV, Rep Office) determines tax obligations and reporting
Documentation Standards	Payroll records must be complete, traceable, and audit-ready	Documentation required for foreign staff exemptions and treaty benefits	Treaty applications demand residency proof and supporting documents
Tax Invoicing	Compliant fapiaos must be issued through the Golden Tax System	Applicable to reimbursement and benefits paid to cross-border staff	Withholding tax rates may be reduced through proper treaty use
Digital Integration	Adoption of e-fapiao enhances reporting efficiency but increases scrutiny	Digital payroll systems must handle multi-currency compliance	Integration with global systems supports transparency and consistency
Risk Exposure	Non-compliance may lead to fines, audits, and reputational harm	Double taxation risks affect both the employer and employees if not mitigated	Poor tax structuring increases cost and compliance burden
Optimisation Measures	Regular updates to payroll processes and reporting tools	Partnering with global payroll providers or local compliance firms ensures alignment	Tax incentives for R&D and high-tech entities reduce overall liability

Together, these functions form the backbone of a compliant and scalable payroll and tax framework in China. For multinational companies, success depends on maintaining accuracy at the local level while integrating these processes with global governance standards. Engaging trusted in-country advisors or regional payroll partners ensures continuity, reduces compliance risk, and enables confident expansion in one of Asia’s most regulated business environments.

How Do International HR Services and Employer of Record (EOR) Services Work in China?

International HR services, particularly Employer of Record (EOR) solutions in china, are becoming the go-to model for foreign businesses entering China without setting up a local entity.

An EOR legally employs staff on your behalf, handling:
Employment contracts compliant with Chinese labour laws.
Payroll processing, tax withholding, and social security payments.
HR administration, onboarding, and benefits management.

This model reduces entry barriers, speeds up hiring, and keeps you compliant without investing in a full legal presence.

What Are the Best Onboarding Solutions for Cross-Border Payroll in China?

Onboarding cross-border teams in China requires more than administrative setup—it sets the foundation for legal compliance, operational alignment, and long-term retention. For multinational companies, getting this right is critical to establishing credibility and building an integrated workforce.

1. Visa and Work Permit Processing

Securing the correct documentation for expatriates is the first non-negotiable step. Employers must ensure:

Visa applications are complete and submitted in line with regional immigration requirements
Work permits, especially Z-visas, match the employee’s job classification.
Renewals and residence registrations are managed without lapse.

Any delays or errors at this stage can result in non-compliance, delayed start dates, and reputational risk for the employer.

2. Compliance and Policy Induction

New employees must understand the regulatory framework from the outset. An effective compliance induction includes:

A clear overview of employment rights, entitlements, and contractual obligations
An explanation of payroll structure, including Individual Income Tax (IIT) and social insurance contributions
Familiarisation with internal HR policies, workplace systems, and reporting lines

Providing this clarity early improves transparency and reduces the likelihood of future disputes.

3. Cultural and Organisational Integration

For foreign hires, adjusting to local business practices can be challenging. To support cultural onboarding, employers should offer:

Guidance on workplace etiquette and communication norms
Insights into management styles and team dynamics
Basic language or key terminology support where needed

This reduces friction and enables faster integration into cross-functional teams.

4. Digital Onboarding Platforms

Digital solutions have become essential in managing distributed teams. A strong platform should provide:

Centralised access to documentation and digital signatures
Automated workflows for compliance tasks and induction modules
Built-in audit trails and regulatory checks

Well-designed digital systems improve consistency, reduce administrative workload, and ensure compliance across multiple jurisdictions.

For employers operating cross-border payroll in China, onboarding is not simply about filling forms—it is a strategic process that reinforces compliance, fosters inclusion, and lays the groundwork for effective operations. Companies that invest in structured, locally informed onboarding reduce attrition, earn employee trust, and strengthen their workforce from day one.

Conclusion

As China’s regulatory environment evolves, payroll has become a vital part of corporate governance rather than a simple back-office task. Beyond processing, companies must address minimum wage rules, taxation, employee benefits, and cross-border complexities.

Long-term success requires:

Regulatory alignment: Staying compliant with tax, social contributions, and regional wage laws.
Scalable systems: Using global payroll and digital HR platforms for accuracy and transparency.
Local expertise: Leveraging tailored HR and onboarding solutions for compliance and workforce integration.

Galaxy Payroll Group helps multinational businesses build future-ready payroll strategies through fully managed, compliant services. From international tax planning and employee onboarding to benefits and cross-border payroll, we ensure seamless operations throughout the APAC region.

Need Support Navigating Payroll in China?

Partner with Galaxy APAC for fully compliant, end-to-end payroll and tax solutions.

FAQ’S

What are the core payroll obligations for employers in China?

Employers in China must process employee salaries in compliance with local law, which includes accurate Individual Income Tax (IIT) withholding, mandatory contributions to social insurance and the housing fund, and adherence to regional payroll reporting standards.

How does minimum wage legislation vary across China?

Minimum wage rates in China are set at the provincial or municipal level and adjusted based on local cost-of-living benchmarks. Businesses must stay informed about these changes to ensure they maintain lawful compensation practices across multiple locations.

Are foreign employees in China required to contribute to local social insurance schemes?

In most cities, foreign nationals are subject to the same social insurance obligations as domestic employees. However, exemptions may apply if a bilateral agreement exists between China and the employee’s home country, and proper documentation is provided.

What are the risks of payroll non-compliance in China?

Failure to meet payroll or tax obligations can lead to administrative penalties, legal liabilities, delayed employee payments, and reputational damage. With increased regulatory scrutiny, accurate reporting and timely submissions are essential.

What should employers consider when onboarding cross-border hires in China?

Cross-border onboarding requires attention to immigration procedures, compliance briefings, cultural integration, and the use of secure digital platforms. A structured, locally informed approach ensures alignment with legal standards and supports long-term workforce integration.

11 Ways of Managing a Global Team Successfully

September 26, 2025 by digitalgowhere

September 26, 2025

11 Ways of Managing a Global Team Successfully

In today’s global economy, the workplace extends well beyond traditional boundaries. Organisations operate across time zones, legal systems, and cultures, enabling access to global talent while introducing complex managerial challenges. Leading cross-border teams requires more than conventional leadership; it calls for regulatory fluency, operational discipline, and cultural intelligence.

This article outlines eleven proven strategies for managing multinational teams, designed to enhance efficiency, promote cohesion, and unlock the full potential of a diverse, globally dispersed workforce.

Get our quick guide on: How Workforce Expansion Efficiencies Are Able to Help Companies Drive Business Growth

Table Of Content

The Strategic Importance of Workforce Management for Global Teams

Workforce management is a critical global business imperative that requires aligning people, processes, and policies across diverse countries, cultures, and regulatory frameworks. It goes far beyond administration, addressing complex issues such as labour law compliance, payroll, and benefits, while enabling organisations to achieve both operational excellence and regulatory certainty.

Employer of Record (EOR) solutions are central to this approach, allowing companies to manage cross-border teams without establishing local entities. By handling compliance, contracts, tax obligations, and administration, EORs reduce risk and free organisations to focus on strategic goals. At the same time, consistent policies and equitable treatment foster employee trust, strengthen retention, and enhance long-term organisational resilience.

Key Organisational Benefits of a Well-Managed Global Team

Effective management of a global team can be a game-changer for businesses. It means the ease of doing business, faster decision-making, and a sense of connectivity despite geographical distance. The staff is highly energised and motivated, which maximises connectivity and provides better outcomes.

An effective global team results in innovation, encourages innovative problem-solving, and enables organisations to react promptly to changing market trends. It fosters a strong and cohesive culture through team participation, positioning the business strategically for sustainable success and long-term growth.

11 Proven Approaches to Managing a Global Team with Employer of Record (EOR) Expertise

With the growth of companies across borders comes the management of a global labour force that necessitates more than operational management—it calls for precision in compliance, workforce agility, and cultural fit. EOR solutions offer exceptional value in facilitating cross-border hiring, reducing employment risk, and providing market access without the need to set up in-country entities.

Here are 11 proven strategies to manage global teams effectively, with EOR services acting as a strategic enabler for compliance, speed, and scalability:

1. Streamline Onboarding with EOR Expertise

Smooth onboarding is vital to employee engagement and productivity. With Employer of Record (EOR) services, businesses can:

Ensure compliant contracts, benefits enrolment, and statutory payroll are handled locally and accurately.
Accelerate new hire integration by removing delays caused by legal complexities or document errors.
Shift focus from administrative tasks to strategic talent development from day one.
Reinforce a professional, compliant image of your brand to international hires.

EOR services reduce risk during onboarding while enhancing employee confidence and clarity from the start.

2. Build a Global Communication Infrastructure

Managing a global team across time zones and cultures requires consistent, accessible communication.

Establish dedicated channels for daily operations, feedback loops, and cross-functional collaboration to facilitate seamless communication and effective teamwork.
Encourage asynchronous updates to accommodate regional working hours.
Regular communication builds transparency, accountability, and a shared understanding of priorities.

EOR providers can help facilitate internal messaging tailored to local cultures and employment expectations.

3. Align Global Teams Around Shared Goals and KPIs

Clear objectives and measurable KPIs are essential for maintaining alignment and accountability across global teams.

Define performance metrics that align with overall business strategy and regional priorities.
Track individual and team progress transparently through structured reporting systems.
Use collaborative tools to maintain visibility, streamline updates, and drive accountability.

This approach ensures every team member remains focused on outcomes that support sustainable global growth.

4. Prioritise Cultural Awareness and Local Inclusion

Cultural sensitivity fosters engagement and reduces the risk of miscommunication.

Respect local holidays, norms, and customs when scheduling and recognising events.
Build inclusive decision-making frameworks that elevate diverse perspectives.
Offer language flexibility, localised benefits, and regional leadership opportunities.

EOR services enhance localisation efforts by supporting region-specific HR practices without requiring legal setup in each country.

5. Build Trust in Remote and Hybrid Teams

In global environments where teams rarely meet in person, trust becomes a key driver of performance.

Recognise achievements across all levels with region-appropriate methods.
Foster psychological safety by encouraging open feedback and transparent updates.
Trust leads to faster decision-making, lower turnover, and stronger collaboration.

By ensuring seamless payroll, statutory compliance, and reliable employee support, EOR services reinforce trust at every touchpoint.

6. Select Integrated Digital Collaboration Tools

Digital tools bridge the operational gap between remote teams—if implemented thoughtfully.

Invest in platforms that support file-sharing, video conferencing, task management, and HR documentation.
Ensure tools integrate well with your existing HR and finance systems.
Regularly audit tool usage to improve adoption and eliminate inefficiencies.

Efficient workforce management depends on technology that enhances—not complicates—day-to-day collaboration.

7. Coordinate Time Zones and Workflows Intelligently

Without careful coordination, time zone differences can disrupt productivity.

Structure overlapping hours for cross-functional teams.
Use shared calendars and global scheduling tools to avoid missed connections.
Rotate meeting times to ensure fairness and maintain engagement.

EOR partners can help align local working hours and public holiday calendars with company-wide workflows.

8. Ensure Employer Compliance Across Jurisdictions

One of the most complex aspects of global employment is adhering to local employer compliance regulations.

Every country has its own rules for minimum wage, benefits, leave, termination, and taxation.
Non-compliance can result in financial penalties, damage to the brand, and employee dissatisfaction.
Employer of Record services act as the legal employer on your behalf—managing contracts, payroll, tax filings, and local obligations.

This eliminates the need to set up separate entities in each country while maintaining full compliance.

9. Recognise Talent and Tailor Motivation Strategies

Recognition builds loyalty and drives productivity when executed with precision.

Offer a mix of public acknowledgement, personalised feedback, and tangible incentives.
Tailor recognition programs to reflect cultural nuances and individual preferences.
Link career development to recognition to retain top talent in competitive markets.

Global reward systems can be easily aligned with EOR services, enabling accurate and timely administration across borders.

10. Lead with Empathy Backed by Operational Clarity

Empathetic leadership increases resilience, especially in multicultural teams.

Understand employee concerns around remote work, relocation, or family responsibilities.
Combine empathy with data-driven clarity to avoid ambiguity and inefficiency.
Document expectations clearly, provide regular feedback, and maintain accessibility.

EOR providers offer regional HR support, helping businesses address local issues with both compliance and care.

11. Adapt Processes to Evolving Workforce Needs

Global business environments shift quickly. Static processes rapidly become obsolete.

Conduct regular audits of your global team operations.
Use feedback loops to identify inefficiencies in talent onboarding, workflow design, or benefits delivery.
Be proactive in updating systems, tools, and policies in line with market conditions.

With the support of workforce management specialists and EOR services, your business remains agile and ready to scale.

Bonus Insight: Simplify Work Permit and Visa Services

Expanding internationally often requires hiring talent across borders, making work permit and visa services an essential part of your hiring toolkit.

EOR partners often assist with or advise on visa sponsorships, documentation, and legal pathways to employ foreign talent.
Avoid delays and costly errors by relying on compliant visa handling and employment structuring.
This enables companies to recruit the best talent—regardless of location—while adhering to legal limits.

conclusion

The global workforce management is more than a simple coordination function; it requires a comprehensive understanding of local laws, local cultural differences, and operational effectiveness. Companies need to adopt effective workforce management practices that safeguard against non-compliance, facilitate efficient onboarding, and support effective teamwork at the team level. When all these elements come together, companies can maintain flexibility, empower employees, and build consistent performance while managing operational risks.

Galaxy Group specialises in turning these complexities into opportunities. Through its Employer of Record (EOR) solutions, as well as handling payroll, compliance, work permits, visas, and other services, Galaxy helps enterprises gain quick and convenient access to foreign markets. With regional knowledge, easy solutions, and a tested platform, the company helps enterprises unleash the full potential of their multi-country employee population to achieve growth, productivity, and long-term profitability.

Expand Your Global Team with Confidence

Hiring overseas shouldn’t come with unnecessary complications. Our EOR solutions take care of local compliance, contracts, and payroll—so you can focus on building a strong, global team.

FAQ’S

What is an Employer of Record (EOR) and how can it help manage a global team?

An EOR handles contracts, payroll, benefits, and compliance, making it easy to hire and manage employees across countries.

How can companies stay compliant when hiring employees in multiple countries?

Local labour laws and taxes vary. An EOR ensures all legal requirements are met, reducing risk and complexity.

What are some practical ways to communicate across a global team?

Utilise regular check-ins, collaboration tools, and clear guidelines while respecting different time zones to maintain alignment.

How can organisations keep employees engaged and motivated in a remote or distributed team?

Recognise achievements, provide feedback, and foster inclusivity so employees feel valued and connected.

What challenges do companies face when managing a global team, and how can EOR services help?

Managing compliance, payroll, time zones, and cultural differences can be a significant challenge. EOR services simplify these tasks, letting teams focus on growth.

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Blog

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China’s ESG Reforms: At a Glance

Structure & Key Principles of the CSDS in China

Three-Tier Framework

Core Principles

Four-Pillar Disclosure Framework

Stock Exchanges and Regulatory Phases in China

Exchange-Level Requirements

Phased Implementation Timeline

Practical Steps for Businesses in china for 2026

Conduct a Gap Assessment

Build Data Infrastructure

Design a Reporting Framework

Cross-Jurisdiction Alignment

Strengthen Governance and Oversight

Monitor Regulatory Updates

Key Risks, Challenges and Mitigation for businesses in China

Opportunities and Strategic Advantages for Business in China

What to Watch in 2026 and Beyond

Conclusion

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Table Of Content

Leveraging Employment Expenses for Strategic Advantage in Singapore

What Are the Allowable Employment Expenses for Accounting Services in Singapore According to IRAS Guidelines?

Key Principles Under IRAS

Importance of Documentation

Why Strict Compliance Matters

What Are the Categories of Allowable Employment Expenses in Singapore Accounting Services?

Significance for Companies in Singapore

What Are Non-Allowable Employment Expenses in Singapore Accounting Services?

Key Insight

How to Calculate and Substantiate Claims with Professional Accounting & Tax Services

Work-from-Home (WFH) Cost Apportionment

Documentation Requirements

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2. Attach the schedule to the annual income tax return:

3. Provide supporting evidence if requested:

4. Review the Notice of Assessment (NoA):

How Do Allowable and Non-Allowable Employment Expenses Compare?

Compliance Risks and Reporting Pitfalls in Singapore Accounting Services

Conclusion

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Table Of Content

Why Payroll Needs a Founder’s Attention from Day One?

Risks of Poor Payroll Management

Strategic Benefits of Early Payroll Integration

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1. Regulations Vary Widely

2. Compliance Drives Credibility

3. Strategy Matters

How Does Payroll Complexity Vary Across APAC?

The Cost of Non-Compliance

Strategic Consideration

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When to Consider the EOR Model

Strategic Benefits of the EOR Payroll Model

11 Must-Know Payroll Practices for Managing Operations

1. Understand Local Statutory Requirements

2. Align Payroll with Local Holidays and Pay Cycles

3. Implement FX-Optimised, Multi-Currency Payroll Systems

4. Automate Tax Calculations and Statutory Filings

5. Integrate Time and Leave Management

6. Stay Updated on Regulatory Changes

7. Offer Statutory and Competitive Benefits