Common Questions About the Housing Fund China Answered

China Housing Fund System is formally known as the Housing Provident Fund (HPF). It is one of the key aspects of employee benefits in the country. It was established to assist employees in purchasing homes. It is a compulsory saving program for both employers and employees.

Understanding the complexities of the HPF system is challenging. This is especially true for foreigners or newcomers to China. This blog guide answers common questions about China’s Housing Fund.

What is the Housing Fund China? 

It is a government-mandated program. Both employers and employees must contribute a percentage of the employee’s salary to a special account. Employees can later use these funds to invest in a home, pay home renovation bills, or even pay off a mortgage. The municipal level governs the HPF in China. Its rules vary by city. 

Who is required to contribute to the HPF in China?

Employees and employers make a contribution to the Housing Fund China in China. This mandate concerns all employees with labor contracts in China. The contribution is usually a percentage of the employee’s monthly wages. Both the employer and employee contribute equally. The percentage may differ by city. It does not usually exceed 12%, but may be as low as 5% of the employee’s salary.

How are the contributions calculated for Housing Fund China?

The contributions to the Housing Fund China are calculated depending on the average monthly remuneration for the employee in the previous calendar year. Both the employer and the employee contribute a percentage of this salary, which depends on the local legislation. For instance, where the local regulation indicates a contribution rate of 10%, the employer and the employee will contribute 10% of the average monthly salary of the employee to the fund.

Can foreigners participate in the HPF in China?

Yes, foreign workers who are legally working in China are allowed to enroll in the Housing Fund China as long as they have a legitimate working permit and signed a legal contract of employment with their Chinese employer. Nevertheless, foreigners’ participation is not obligatory in all cases, and the regulations concerning this issue may differ depending on the city. While participating in the HPF in China may be optional in some cities, others have policies that make this participation compulsory for foreigners employed in that city.

How can the HPF in China be used?

• Purchasing a home: The primary purpose of the funds contribution is to help employees finance the purchase of a home. The members can use the amount saved in the  account to partly pay the initial deposit or to pay off the mortgage.
• Home renovations: Employees can also use the HPF in China to borrow money for remodeling or improving their homes.
• Mortgage payments: An employee with a home can pay his or her monthly mortgage through the funds contribution.
• Rental payments: It is also important to note that in some of the cities, the HPF can be used to pay for renting an apartment though this kind of expenditure is regulated by the laws of that specific city.

How do I withdraw funds from my HPF account?

Surrendering the funds from the HPF is comparatively easy; however, it must be done with necessary documentation. The employee was to provide a statement of the purchase, his or her identification card and other documents which may be required for the withdrawal of the money. The particulars of it may depend on the specific city, so it is best to consult the laws in place. Employees often make down payments or pay mortgages from the HPF account by directly withdrawing from the account.

What happens to my funds contribution account if I leave China?

With regards to the options available for withdrawal, if a foreign employee wishes to leave China for good, they are likely to be allowed to withdraw the balance of their HPF account fully without any difficulties. The withdrawal process entails submitting documents that show that the employee has left China, and they include canceled residence permit and a ticket. Once the paperwork is complete, the funds can then be wired into the bank account of the employee, which can be located either in China or internationally.

Can the HPF be transferred between different cities?

Yes, it is transferable across the different cities in China by the users as it serves as a housing saving plan. In addition, if an employee selects a new city during the coverage period, it is possible to transfer the account of the said employee. The transfer process entails the closure of the account in the sender city and the opening of a new account in the recipient city. However, it is imperative to understand that such transfer has to be in compliance with the relevant regulations of the two cities and the employee has to ensure that he or she submits all necessary papers.

Can I still contribute to the HPF even if I change companies?

Thus, if an employee transfers from one company to another within the same city, the employee can still contribute to this fund. It will be the new employer’s responsibility to contribute to the fund, as mentioned in the legislation governing this particular program. If the job change entails a move to a different city then the employee will also have to transfer his or her HPF account from one city to the other to access the new job.

What are the benefits of contributing to the HPF?

• Low-interest loans: The contributions submitted in the housing fund contribution can be used to access low interest for buying a house for the employees. Such loans are sometimes more advantageous than loans from commercial banks.
• Tax benefits: Donations towards the fund contributions are usually tax-exempt and this has a positive effect of lowering the employee’s tax liability.
• Employer contributions: The contributions made by the employer simply enhance the savings proposed for the employee without the employee bearing any extra costs.
• Security: It ensures employees are financially secure to afford housing needs through a safety margin to fund housing expenses.

Why Innova Legal Consulting?:

The Housing Fund China is also one of the important benefits for the employees in China to support their housing needs. Thus, while this is not the simplest system, knowing more about it will definitely be useful in helping employees make the best of their abilities. This fund provides chances for the foreigner working in China or a Chinese employee to save and make their own home in the future.

Innova Legal Consulting have ample years of practice in dealing with Chinese labor laws and understand the intricacies of the Housing Fund China system thereby urging you to seek its services. In this regard, we offer realistic guidelines to the user that fit these needs so that you can benefit without violating any local regulation.

If you have any further queries or are interested in seeking legal consultation, you can visit our website or call us. Don’t miss the chance to maximize your fund contributions and build a housing future for yourself in China.