At the recent opening of the Chinese National People's
Congress, Prime Minister Li Keqiang announced that business tax
would be replaced by VAT across all insurance sector industries by
At the opening of the National People's Congress on 5 March,
Prime Minister Li Keqiang announced in his Government Work Report
2016 that VAT would replace Business Tax across all industries by 1
The announcement means that the remaining sectors; construction,
real estate, finance and insurance and consumer services will be
subsumed into the national VAT reform program. Essential measures
such as VAT that is included in invoices against newly purchased
immovable property of enterprises for example, will be considered
deductible input tax. This measure is to assure the effectiveness
of the VAT reform in reducing the tax burden of industries.Some
other approaches that have been specified to reduce the
aforementioned tax burden include removing some governmental funds
and minimising the scope of 18 governmental fees and charges.
While implementation of the rules are yet to be issued by the
Ministry of Finance and China's State Administration of
Taxation, potential changes to taxes on the insurance premium can
be expected as follows:
The 5% business tax will be removed
and replaced with VAT at an anticipated rate of 6% although the
rate has yet to be confirmed. It is not a mere change of rate;
business tax is meant to be a corporate tax while VAT will be a tax
on the insured.
The anti-flood levies charged on
insurance premium for the Water Conservancy Construction Fund,
currently applicable at Provinces level with various rates, will be
reduced or removed.
Other governmental fees and charges
imposed on the insurance industry, including an Urban Construction
tax of 7%, Educational Surtax of 3% and Local Educational Surtax of
2% are likely to be re-constructed or reduced.
Talk to us
Now is the time to prepare for the structural change in
China's indirect tax regime. You can find up-to-date
information on tax regulation in TMF Group's
IPT Quote online tax calculation tool, which is designed to
assist your global insurance program.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
As per the terms of the SPA the said parent company had various rights and responsibilities as a sponsor.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).