The development of the “third pillar” in the elderly endowment insurance system with preferential taxation policies can be considered as a supplement to the basic elderly care insurance and enterprise annuities. As it involves various authorities, there have been rumors on the launching of the elderly endowment insurance with tax deferral each year. However, it is really on the way.
The plans on the pilot on purchasing commercial pension care insurance before paying personal income taxes (hereafter referred to as the elderly endowment insurance with tax deferral) are under preparation and will be submitted to the State Council for approval before implementation, indicated Huang Hong, Vice-chairman of the China Insurance Regulatory Commission (CIRC), at the briefing of the State Council Information Office on June 23. It means that the pilot on the elderly endowment insurance with tax deferral will see substantial progresses after eight years of mulling.
Huang indicated that the opportunities and conditions are mature and met for conducting the pilot on the elderly endowment insurance with tax deferral. But Huang provided no details on the range of the pilot, the calculation of deferred taxes and the contribution as well as other details.
An insider told the National Business Daily that “thanks to the previous basis for the policies on health insurance with tax deferral, it is expected that the actual effects of the elderly endowment insurance with tax deferral will be better.”
●To implement after eight years of mulling
The pilot on the elderly endowment insurance with tax deferral was proposed eight years ago. In 2009, it proposed to conduct the pilot on the elderly endowment insurance with tax deferral when appropriate in the opinions of the State Council on speeding up the development of the modern services and advanced manufacturing in Shanghai and building an international financial center and an international shipping center in 2009.
The Ministry of Finance (NOF), the Ministry of Human Resources and Social Security and the State Administration of Taxation (SAT) jointly released the circular on relevant issues on personal incomes taxes on enterprise annuities and occupational annuities in the end of 2013, proposing to implement preferential policies with tax deferral on personal incomes taxes on enterprise annuities and occupational annuities from Jan. 1, 2014. In August 2014, the “new ten rules” were released, proposing to conduct the pilot on the elderly endowment insurance with tax deferral when appropriate.
The MOF, the SAT and the CIRC jointly released a document in the end of 2015, proposing to implement preferential policies on person incomes taxes on individual commercial health insurance. The 13th Five-year Plan also proposed to introduce the elderly endowment insurance with tax deferral.
It is noteworthy that there have been rumors on the pilot on the elderly endowment insurance with tax deferral since the beginning of 2017. MOF officials indicated in March that it has formed policy suggestions on relevant policies and technical problems involved in the pilot on the elderly endowment insurance with tax deferral. On June 21, the State Council executive meeting proposed to increase policy supports and implement relevant fiscal and taxation policies supporting the development of insurance and elderly care services industries and speed up the pilot on the elderly endowment insurance with tax deferral.
Insiders believed that the authorities changed the wording from “conducting when it is appropriate” to “implement as soon as possible”, which shows that the advancing will speed up. However, based on the prudent wording of the regulatory authorities, the plans have not been finalized and have to be passed by the State Council as it requires the coordination among the MOF, the SAT and other authorities.
As a new system design and arrangement, Huang indicated that “the elderly endowment insurance with tax deferral has to consider the fairness of the taxation system and benefit more with the policy as well as the feasibility and convenience of the practical operation and achieve seamless connection with the taxation regulation system. It has to learn from the experiences from developed countries and fully consider the conditions of China.” Out of the above considerations, the CIRC is active and prudent in the study of policies and the design of the system.
Huang indicated that the opportunities and conditions are mature and met for conducting the pilot on the elderly endowment insurance with tax deferral.
● Experts: EET model has deficiencies
In the opinion of Huang, the so-called opportunities and conditions refer to the economic and legal basis.
Firstly, the per capita GDP exceeded 8,000 U.S. dollars in 2016. The public can afford certain commercial endowment insurance, which provided conditions for the implementation of the policy. Based on international experiences, the implementation of the elderly endowment insurance with tax deferral is conducted when the per capita GDP reached the level of a medium developed country.
Secondly, based on the construction of the legal system, the construction of the legal system in all aspects has been advancing and relevant laws and regulations on insurance regulation have been improving in recent years. The revision of the insurance law and the reform of the taxation policies provided legal basis for the policy.
In addition, Huang mentioned that the taxation contribution is mainly decocted by enterprises while freelancers mainly pay taxes themselves. Led by the MOF, the CIRC and the SAT as well as other authorities are actively discussing relevant problems and the plans are under preparation. But no details such as the tax deferral mechanism have been disclosed.
Based on the plan on individual elderly endowment insurance with tax deferral in Shanghai previously submitted, the contract-based products include universal and bonus-based products. It adopts the EET model with tax deferral. For preferential taxes, enterprise annuities and individual endowment insurance accounts can share the limit for payment before deducting personal incomes taxes. The individual endowment insurance account can pay 700 yuan while the enterprise annuity account can pay 300 yuan.
“Due to the small size of taxpayers for incomes and salaries in China (currently about 28 million), only a few taxpayers can benefit in the EET model. In addition, the EET model has limited significance on middle-income groups and it will see difficulties in attracing them to purchase commercial endowment insurance,” indicated Zhu Junsheng, a researcher of the Research Institute of Finance, Development Research Center of the State Council. Zhu advised to implement the preferential taxes on the TEE to pay fees after taxes. No fees will be paid in investment and receiving. It will increase the choices of holders of pension accounts and expand the coverage.
The National Business Daily learnt that as a result of the basis on the pilot on health insurance with preferential taxes, insiders expected that the actual effects of the pilot on the elderly endowment insurance with tax deferral will be better. It is learnt that the CIRC has been prepared in regulation systems, demonstration clauses and IT guarantee.
Translated by Star Zhang
Latest comments