Starting 1 July 2017, a pilot program that exempts the premium paid for qualified commercial health insurance from taxable income will be implemented nationally.
This program has already been implemented in 31 cities, including Beijing, Shanghai, and most major Chinese cities. This will expand the policy to smaller cities, as well as to rural areas. It is expected to increase insurance premiums by billions of RMB.
Under this policy, individuals will be able to claim up to 2,400 RMB annually for premiums paid on qualified commercial health insurance products. This is in addition to payments from statutory tax deductions.
The policy differs depending on who is paying for the insurance. If the employer pays, or the employers and employee both pay the cost, there is a monthly cap of 200 RMB in addition to the annual cap of 2400 RMB. The cost of commercial health insurance products will be included in the employee’s wage and salary. The employee can then claim their deduction. The monthly 200 RMB limit does not apply to self-employed, contracted, leased, and similar workers, as they are taxed on an annual basis.
The new policy also sets out standards on what a “qualified” commercial health insurance product is. One such policy is the “guaranteed low-profit principle,” which limits how profit companies can make for each product sold.
Chances are, you were already living in a city where the program was in place, so you won’t be directly affected. This policy is significant for the Chinese Health Insurance market, which may soon grow to over 100 billion RMB. Like we’ve said in the past, if you’re prepared, this industry provides a lot of opportunities, for both foreign and domestic companies.
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Manuela Reintgen has been living and working in Shanghai and Beijing since 2009 and recently joined ECOVIS Beijing as Manager of the Business Development team. Having focused on foreign direct investment into China for the last few years, she advises clients on all aspects of establishing and doing business in China. Contact: firstname.lastname@example.org
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