24 Dec 2015
Tax Incentives for Health Insurance Pilot Policy Starts from January 2016
The Ministry of Finance, the State Administration of Taxation (SAT) and China Insurance Regulatory Commission (CIRC) jointly issued a circular on 11 December 2015 on the implementation of a pilot policy of individual income tax related to qualifying types of commercial health insurance. Under the pilot policy, for any individual who buys specified health insurance products, an annual cap of Rmb2,400 will be set as the allowable tax deduction in respect of the relevant premiums paid. The circular will take effect from 1 January 2016.
Health insurance products are universal life insurance offering protection and minimum guaranteed income benefits, including the dual functions of health insurance and savings in personal accounts. Personal accounts of the insured are managed and maintained by the insurance company.
Pre-existing condition insurance has become a reality. The circular stipulates that the insured belongs to the taxpayer group of above 16 years of age and below the statutory retirement age. The insurance company cannot refuse to offer coverage for reasons of past history of the insured, and renewal has to be guaranteed. Based on different circumstances of the insured, premium can be different for the same type of health insurance product with the specific amount of premium prescribed by CIRC.
Individuals receiving wage and salary or compensation for continuous services shall promptly provide policy document to withholding agents when buying their own qualifying types of health insurance products in accordance with regulations. Withholding agents, starting from the second month after submission of policy documents by individuals, shall make deduction monthly on the basis of no more than Rmb200 per month. The portion of premium exceeding Rmb2,400 per year is not deductible. Annual renewal in the second or later years is also subject to the same regulations.
For qualifying types of health insurance products bought by central organisations of work units for employees or jointly purchased by work units and individuals, the portion undertaken by units shall be included in real name in the individual salary details lists, as if purchased by individuals. From the second month of the date of purchase, the premium shall be deducted monthly on the basis of no more than Rmb200 per month. The portion of premium exceeding Rmb2,400 per year shall not be deductible. Annual renewal in the second or later years is also subject to the same regulations.
31 Pilot Areas
The circular stated that the pilot areas to implement the commercial health insurance individual income tax policy are: Beijing, Shanghai, Tianjin, Chongqing, Shijiazhuang, Taiyuan, Hohhot, Shenyang, Changchun, Harbin, Suzhou, Ningbo, Wuhu, Fuzhou, Nanchang, Qingdao, Zhengzhou (including Gongyi), Wuhan, Zhuzhou, Guangzhou, Nanning, Haikou, Chengdu, Guiyang, Qujing, Lhasa, Baoji, Lanzhou, Xining, Yinchuan (excluding the counties) and Korla.