Since there’s no requirement to register firms with the market supervision and administration authorities, the nature of law firms has long been a subject of ongoing debate and bureaucratic red tape. When it comes to paying taxes, they’re classified as "businesses"—and similarly treated as businesses when it’s time to contribute to social insurance. Yet, when it’s time to claim relevant tax breaks or subsidies, some departments inexplicably inform them that they don’t qualify as "businesses."

Recently, a letter titled "Opinions from the General Office of the Ministry of Justice on Issues Related to Law Firms' Implementation of Social Insurance Fee Reduction and Exemption Policies" surfaced online. The letter provides a comprehensive and objective explanation of the nature of law firms, making it a valuable resource for relevant departments to study and reference carefully.

Shandong Provincial Department of Justice:

We have received your office's "Request for Confirmation of the Nature of the Law Firm." After careful consideration, here is our response:

Although law firms differ from typical business entities and are not required to register as enterprises with market regulators, they still exhibit key business characteristics such as self-generated revenue, self-funded operations, and assuming full financial responsibility for their profits and losses. Like other businesses, law firms are obligated to pay taxes and social insurance contributions in accordance with relevant national regulations. In terms of taxation, the Ministry of Finance and the State Administration of Taxation’s "Regulations on the Collection of Individual Income Tax from Investors in Sole Proprietorships and Partnership Enterprises" (Cai Shui [2000] No. 91) explicitly state that the term "enterprise" under these regulations includes law firms registered and established in accordance with the "Lawyers Law of the People's Republic of China." Similarly, regarding social insurance contributions, law firms—and their lawyers and other employees—are legally required to participate in the basic pension insurance scheme for urban enterprise employees, along with other mandatory social insurance programs, ensuring that they adhere to the same social security policies applied to traditional businesses. Since the outbreak of the COVID-19 pandemic, law firms across various regions have proactively shouldered their social responsibilities despite facing challenges in maintaining business growth. They have worked diligently to stabilize employment and retain their workforce, even as their operations were impacted. Moreover, these firms have actively supported lawful epidemic prevention and control efforts, facilitated the resumption of business activities, and provided essential services to both enterprises and the public. As a result, they rightfully deserve access to appropriate policy support measures. Therefore, to fully and accurately implement the decisions and arrangements made by the Party Central Committee and the State Council, and to effectively support and promote the healthy development of the legal profession, during the implementation of social insurance fee reduction and exemption policies amid the pandemic, law firms should be categorized similarly to businesses and treated equally, benefiting from the same relief measures available to corporate entities.

General Office of the Ministry of Justice of the People's Republic of China

June 10, 2021