MHRSS unveils new tax initiative for EA
10 December 2013
Category: News, Asia, China
By Hui Ching-hoo
New tax exemptions and deferrals for enterprise annuity (EA) unveiled by the Ministry of Human Resources and Social Security (MHRSS) on December 6 have been well received by market pundits, who say the measures will help revive the country’s EA market.
The MHRSS said on its website that the initiative will exempt tax on individuals’ contributions to annuities, and that employers and employees will be able to enjoy a tax break from contributions. The directive will come into force from January 1, 2014.
Zheng Bingwen, director of the centre for international social security studies at the Chinese Academy of Social Sciences, tells Asia Asset Management that the new initiative is modelled on the US 401(k) plan’s adoption of the EET (exempt-exempt-taxable) model. He says tax concessionary measures will be critical to helping motivate more Chinese enterprises to participate in the EA scheme. Mr. Zheng also expects the initiative to bolster the average return of EA products.
According to figures from the MHRSS, China’s EA funds posted a poultry return of 0.63% in the second quarter this year – 536.6 billion RMB (US$85.2 billion) as of the end of September.