China launches pilot Individual Income Tax policy for commercial health insurance
The Ministry of Finance (MOF), State Administration of Taxation (SAT) and China Insurance Regulatory Commission (CIRC) have released Circular 126 which outlines the pilot Individual Income Tax (IIT) policy for commercial health insurance products.
Until 2015, commercial health insurance expenses did not qualify for individual income tax exemption.
Under the new Circular, the certain qualifying health insurance products in pilot areas can be deducted for IIT purposes. The changes have come into effect from 1 January 2016.
Pilot areas include Beijing, Shanghai, Tianjin and Chongqing as well as 27 designated cities located in 27 provinces. Individuals whose IIT is filed in the pilot areas may be eligible for income tax deductions for certain health insurance premiums, up to certain limits.
It is important to know that only such commercial health insurance products are eligible for preferential IIT treatment that are developed according to the guiding framework outlined in Circular 126 and Circular 118.
The purchase of qualifying health insurance products by individuals in pilot areas can be deducted for IIT purposes up to RMB2,400 (US$400) per year.
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