In recent years, the rapid expansion of the digital economy has resulted in a surge of cross-border data activities, leading to a substantial increase in the demand for outbound data transfers by enterprises. Consequently, the nation has consistently enacted laws and regulations pertaining to outbound data transfers to establish a legal foundation for data exports.
On 7 July 2022, the Cyberspace Administration of China formally introduced the "Measures for Data Cross-Border Transfer Security Assessment," which came into effect on 1 September 2022. This represents a significant milestone in China's oversight of cross-border transfer activities.
Prior to the implementation of the "Measures for Data Cross-Border Transfer Security Assessment,” the Cyberspace Administration of China released the inaugural edition of the "Guide to Applications for Security Assessment of Outbound Data Transfers" to guide enterprises in submitting declarations for data outbound security assessments.
Then, on 24 February 2023, the Cyberspace Administration of China announced the "Measures for Standard Contracts for Outbound Transfer of Personal Information," which became effective on 1 June 2023. These measures clarify the circumstances under which personal information processors are required to simultaneously provide personal information to overseas entities through the establishment of standard contracts.
HR Digital Transformation
Against the backdrop of increasingly stringent cross-border data transfer legislations and compliance requirements, the HR department, a pivotal component of an organisation’s data management and utilisation, finds itself dealing with an abundance of sensitive personal information of employees and job applicants. This exposes HR practitioners to complex data scenarios and practical necessities, leading to a multitude of challenges in the realm of data compliance.
For large enterprises, navigating intricate data application scenarios necessitates a robust and comprehensive compliance management system. Conversely, small and medium-sized enterprises often grapple with limited investments in compliance management and may struggle to independently establish compliance systems. Cross-border enterprises face the dual challenge of ensuring the legality of processing employee data, fulfilling corresponding obligations related to employee's rights, such as the right to knowledge and erasure, and managing the localisation of employees’ personal data while overseeing the legitimacy of data flows in cross-border transfers. Questions loom: How can enterprises strike the right balance when accessing employee information? How can they meet the legal requirements of outbound employee data transfer compliance? How should they choose outbound routes and select appropriate cross-border data transfer security mechanisms?
This is where HR digital transformation comes into play. The essence of HR digitisation lies in revamping various aspects of HR management with a focus on data privacy and integrating control measures within business processes. The ultimate goal is to enhance overall enterprise management efficiency, optimise employee work experiences, and establish a foundation of compliance and data security.
Digital empowerment enables the creation of a one-stop HR service system for both employers and employees, seamlessly connecting and integrating traditional modules such as recruitment, employment, social insurance, salary management, personal income tax, employee benefits, and employee relationship processing onto the same platform. This integration results in a global HR service ecosystem, including salary integration, which helps enterprises reduce costs and improve efficiency management while ensuring data protection throughout the entire process of employee personal information processing.
1. Efficient Hierarchical Employee Information Management
The HR digital system helps enterprises efficiently categorise and manage extensive employee data. It enables the identification of sensitive personal information, data to be shared with third parties or overseas entities, and information that can be disclosed. This classification process follows specific scenarios, employing methods such as anonymisation and digitisation to eliminate data bias and safeguard data privacy. Simultaneously, information security is fortified through controlled access permissions, data encryption, and the implementation of appropriate security measures.
2. Global Compliance Management
In an era where countries are increasingly prioritising data protection, multinational corporations must navigate and adhere to local privacy compliance requirements and data protection policies to ensure standardised and compliant global operations. Addressing the diverse legal and regulatory requirements of different countries and business contexts is essential. The establishment of a global HR compliance operation platform facilitates efficient management of employees' personal information and safeguards their rights.
3. Employee Digital Privacy Management
A digital HR management system enhances the protection and management of employees' personal privacy. Whether through the acknowledgement of corresponding declarations or the selection of information security confirmations, employees perceive the company’s commitment to safeguarding their personal privacy during the data collection process. Furthermore, the system streamlines the creation of relevant processes within the organisation, enabling employees to access, correct and delete their personal data. This ensures that employees retain full control over their own data.
Accounting and Taxation
- On 30 August 2023, the State Taxation Administration issued the "Announcement on the Implementation of Policies Regarding the Increase in Special Additional Deduction Standards for Personal Income Tax." This announcement includes the following provisions:
1. The monthly standard amount for specific additional deductions for the care of infants and toddlers under the age of 3 and child education has been increased from RMB 1,000 to RMB 2,000 per child.
2. The monthly standard amount for specific additional deductions supporting elderly family members has been raised from RMB 2,000 to RMB 3,000. The full amount of RMB 3,000 can be used for deduction if there is only one child in the family, while the maximum deduction of RMB 1,500, applicable to non-only children, shall be shared among siblings.
3. Taxpayers who have not previously reported or benefitted from specific additional deductions for caring for infants and toddlers under the age of 3, child education, or supporting elderly family members can now report these deductions through the Personal Income Tax App on their mobile phones or through withholding agents. The system will calculate the individual income tax payable based on the updated specific additional deduction standards.
4. Taxpayers who have already reported and paid individual income tax for specific additional deductions before the issuance of this notice can automatically offset the excess tax paid against their subsequent monthly tax liabilities for the current year. If the excess cannot be fully offset, they can continue to enjoy the benefit when settling their comprehensive income tax during the annual IIT filing for the year 2023.
5. This announcement takes effect on 1 January 2023.
- The General Office of Ministry of Human Resources and Social Security has received a letter concerning the processing of withdrawal applications from individual pension participants. This letter, titled “Letter on Issues Related to Erroneous Payment of Individual Pension Participants,” and issued by China Construction Bank, has been carefully reviewed in consultation with the Ministry of Finance, the State Taxation Administration of The People's Republic of China, and China’s National Financial Regulatory Administration. The following response has been formulated:
In cases where individual pension participants have made payments due to operational errors or for other reasons, they are eligible to apply for withdrawal through their bank’s offline branch within 5 days (excluding the day of payment) from the date when the payment is credited to the personal pension fund account. Each participants can make a single withdrawal of their individual pension within a calendar year. The bank holding the account is responsible for promptly upgrading its information system as required. After verification by the individual pension information management service platform, the bank should process the withdrawal request.
The withdrawal of a single payment does not constitute the receipt of individual pension benefits. Therefore, it is not subject to withholding or payment of individual income tax in accordance with the regulations governing the receipt of individual pension benefits.
• Announcement on the Continued Implementation of Individual Income Tax Policies for Subsidies and Allowances for Foreign Individuals - To further alleviate the tax burden on taxpayers, the following individual income tax policies for subsidies and allowances are applicable to foreign individuals:
1. Foreign individuals who satisfy the criteria for resident individuals have the option to either claim special additional deduction for individual income tax or enjoy tax exemption policies for subsidies and allowances, such as housing allowances, language class fees, children’s education fees, as stipulated in the following notices:
• “Notice of the Ministry of Finance and the State Taxation Administration on Several Issues Relating to Individual Income Tax Policies” (Cai Shui Zi  No. 020)
• “Notice of the State Taxation Administration on Issues Relating to the Implementation of Exemption of Individual Income Tax on Allowances of Foreign Individuals” (Guo Shui Fa  No. 54)
• “Notice of the Ministry of Finance and the State Taxation Administration on Levying and Exemption of Individual Income Tax on Housing and Other Subsidies Received by Foreign Individuals in Hong Kong and Macau” (Cai Shui  No. 29)
It is important to note that foreign individuals cannot simultaneously claim special additional deductions and tax exemption incentives. Once a choice is made by a foreign individual, it cannot be altered within a given tax year.
2. This Announcement shall remain in effect until 31 December 2027.
- On 21 September 2023, the Ministry of Commerce ("MOFCOM") released the “Measures of Commercial Franchising Filing (Revised Draft for Comments)” to solicit public feedback until 20 October 2023. The revised draft eliminates Paragraph 10, Article 6 of the older version, which required foreign-funded enterprises to provide a Foreign-funded Enterprise Approval Certificate with a business scope covering activities related to commercial franchising.
Tan Lee Lee
Head of China
Director, Business Advisory, International Desk
Yeo Lee Soon
Director, China Business Advisory, Singapore