(a) Scope of Costs and Fees
All expenses related to an enterprise's production and operation should be treated as costs and fees.
(b) Salaries
The level of salary expenses in an enterprise's costs and fees should be determined by the board of directors in accordance with the relevant state regulations governing labour management of FIEs, taking into consideration the financial conditions of the enterprise and based on the principles of ''reward according to work'' and ''equal work, equal pay''.
(c) Insurance and Welfare Expenses
Enterprises have to set aside dedicated funds to pay for the insurance and welfare expenses of their mainland workers, and these funds can be entered under costs and fees in their books. Such insurance and welfare expenses are to be used for the medical, insurance and other welfare expenses incurred by the employees during their service.
(d) Pension and Unemployment Funds
Enterprises have to set aside dedicated funds for the retirement and unemployment benefits of their mainland workers according the standards stipulated by the local governments. These funds can be entered under costs and fees in their books and managed by institutions specialized in retirement and unemployment funds. Such funds may not be used for other purposes.
(e) Housing and Inflation Subsidies
Enterprises have to set aside housing and inflation subsides for their mainland workers according to the standards stipulated by the financial and labour authorities. These funds can be entered under costs and fees in their books. Housing subsidies should be retained by the enterprises to subsidise the purchase or construction of housing for their mainland workers. Inflation subsides should be handed over to the local financial authority.
(f) Entertainment Expenses
Enterprises may enter under costs and fees in their books entertainment expenses related to production and operation . The maximum limits are as follows:
For manufacturing, farming, husbandry and commercial enterprises whose net annual sales turnover is below Rmb15 million, the limit is 0.5%; for the portion in excess of Rmb15 million, the applicable rate is 0.3%.
For enterprises in tertiary industries, such as tourism, restaurant, transportation, construction, installation, design, consulting, finance, leasing and other services, whose annual business revenue is under Rmb5 million, entertainment expenses must not exceed 1% of their gross income; for the portion in excess of Rmb5 million, the applicable rate is 0.5%.
In the case of cross-sectoral enterprises, the respective rates should be applied to the net sales turnover and the business income. Where it is difficult to differentiate the two, the key business activity of the enterprise will prevail.
(g) Travel Expenses, Meal Allowances and Directors' Fees
The standards and management rules for business travel expenses, meal allowances and directors' fees should be set at reasonable levels by the board of directors and filed with the competent financial authority or central administrative department for the respective industry for the record.
(h) Trade Union Funds
Enterprises should contribute 2% of their total payroll every month to trade union funds, and this item can be entered under costs and fees in their books. Such funds are to be managed and utilized by the trade union of the enterprise in accordance with the relevant rules of the All-China Federation of Trade Unions.
(i) Rebates
Rebates (commissions) received by an enterprise in the course of its business activities in accordance with contracts and agreements should be entered as business income or receivable item under costs and fees. Rebates (commissions) paid out according to contracts and agreements should be entered as expenditure item under costs and fees.
