73 / 127
Human Resources and Payroll in China 2016-2017 (5th Edition) -
73
IIT Incentives for Commercial Health Insurance
On November 27, 2015, China’s Ministry of Finance, together with the State Administration of Taxation
(SAT) and China Insurance Regulatory Commission (CIRC), expanded a trial program of individual
income tax (IIT) reduction on commercial healthcare insurance to cover 31 cities, including Beijing,
Shanghai, Tianjin, Chongqing and certain second-tier cities in other provinces (hereinafter referred
to as the “pilot cities”). Specifically:
• The expenditure incurred by individuals in the pilot cities from purchasing qualified healthcare
insurance products is now permitted to be deducted before IIT collection, with a cap of RMB
2,400 per year (or RMB 200 per month).
• Companies that are established in the pilot cities and purchase healthcare insurance for their
employees will be deemed as purchasing individuals and thus will enjoy the same tax incentives.
The policy came into effect on January 1, 2016. Previously, the pilot programwas only implemented
in four major cities in China. The new document also further clarifies the definition of “qualified
healthcare insurance products,” stipulating that the insurant should be at least 16 years old and
under the mandatory retirement age. Meanwhile, the medical loss ratio (MLR) should be higher
than 80 percent.
Qualified Insurance Company
The CIRC stipulates that insurance companies who provide the above-mentioned healthcare
insurance products need to meet the following criteria:
• The company’s solvency ratio is no less than 150 percent for the past two years.
• No administrative penalty within the latest three years.
• Insurance companies that are not professional healthcare insurance companies should set up a
special healthcare insurance department.
• The company has an independent healthcare insurance information supervision andmanagement
system.
• Employees that have work experience in the healthcare insurance sector should account for at
least 50 percent of the company’s total employees; employees with amedical background should
account for more than 30 percent of its total employees.