Effective from December 1, 2024, China will officially implement the integration of Foreigner’s Work Permits with Social Security Cards. This initiative involves embedding information related to Foreigner’s Work Permits into Social Security Card, leveraging the various functions of the Social Security Card to provide more convenient and efficient services to foreigners working in China. The relevant system update had been completed on December 1.

The Foreign Investment Law of the People's Republic of China (hereinafter referred to as the “Foreign Investment Law”) came into force on January 1, 2020, replacing the Law of the People's Republic of China on Chinese-foreign Equity Joint Ventures, the Law of the People's Republic of China on Wholly Foreign-Owned Enterprises, and the Law of the People's Republic of China on Chinese-foreign Cooperative Joint Ventures (hereinafter collectively referred to as the "Three Investment Laws"). The Foreign Investment Law requires foreign-invested enterprises to align their organizational forms, structures, and behavioral norms with the provisions of the Company Law of the People's Republic of China (hereinafter referred to as the "Company Law").

In practice, some employees may decrease the taxable salary in agreement with the company (or some financial employees on their own decision) and acquire the decreased part of taxable salary by way of reimbursement from the company afterwards. Admittedly, the aforesaid operation is not uncommon in practice. Through such operation employees can pay less personal income tax and the company can carry out accounting and operate through the invoices submitted by employees. Such operation seems just a small favor provided by the company to employees without any detriment to the company's operation. However, in case that employees and the company have labor disputes, such “operation” has become a pain point for both parties. For example, if two parties cannot reach an agreement on the termination of the labor relationship, will the company have the legitimate right to dismiss employees for their suspected evasion of tax? If employees blackmail the company for the company’s cooperation in such operation, how should the company address the problem?