Post by Sapphire Capital on Mar 18, 2016 4:39:34 GMT 4
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 May 2016.
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 May.
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.
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 May.
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.