Commercial Health Insurance

Date:  2017-05-30    Autor:  ECOIVS Ruide Marketing Team

Recently, the Ministry of Finance, the State Administration ofTaxation, and the China Insurance Regulatory Commission have jointlydistributed the Circular on Expanding the Pilot Policy of Individual Income Tax(IIT) on Commercial Health Insurance for Nationwide Implementation (the"Circular"), effective from July 1, 2017.

The Circular makes it clear that from July 1, 2017, the pilotpolicy of individual income tax on commercial health insurance will be expandedto all places in China. According to the Circular, expenditures of individualsfor purchasing commercial health insurance products that are in compliance withapplicable provisions may be deducted before individual income tax when thetaxable income amount is calculated for the current year (month); and thedeductible amount shall be CNY2,400 (CNY200 per month) at most in eachyear.Furthermore,the Circular provides for the applicable targets, standards and conditions ofcommercial health insurance products, tax collection and administration, andother contents. Mainly summarized as follows:

1.    Following month to deduct

The individuals who receivesalaries or remuneration for personal services for a set period shall furnishtheir health insurance policy for withdrawing entities in a timely manner whenthey purchase compliant health insurance products. In the following month, thewithdrawing entities shall deduct personal income tax levied on healthinsurance premium up to CNY200 per month.

2.    Limit to deduct

Where individuals purchasecompliant health insurance products in designated pilot areas, personal incometax shall be deducted according to upper premium limit of CNY2,400 per year(CNY200 per month). The amount exceeding CNY2,400 shall not be deductedpersonal income tax.

3.    Additional to deduct

The limit of deduction, CNY2,400 per year (CNY200 permonth) is not included into the expense deductible by individual tax laws.

4.    Directed to deduct

The commercial healthinsurance specified in Circular on Carrying out Pilot Policies for IndividualIncome Tax on Commercial Health Insurance (Cai Shui [2017]No. 39) refer tohealth insurance products developed by insurance companies according to thepolicy framework and demonstration provisions for health insurance productsoffered personal income tax incentives. Other commercial insurance products shall not bededucted.

5.    As to deduct

Where the employer purchasesthe commercial health insurance for its employees in a unified manner or theemployer and an employee share the expenses to co-purchase the commercialhealth insurance, the part of expenses borne by the employer shall be includedinto each employee's detailed salary list under its real name and thecommercial health insurance shall be deemed as individually purchased by theemployee.

6.    Object to deduct

The taxpayers which thepreferential tax policies for commercial health insurance apply to:

(1)  individuals who receive  wages and salaries or remuneration forpersonal services for a set period;

(2)  as well as the individualbusiness owners, investors of sole proprietorship, partners of partnershipenterprises and contractors or leasee in pilot regions who receive income fromproduction and operation by individual businesses, or income from contracted orleased operation of enterprises or institutions.

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