China’s CIRC lays down blueprint for tax-deference scheme
28 January 2013
By Hui Ching-hoo
China Insurance Regulatory Commission (CIRC) laid down a preliminary agreement for the long-awaited tax-deferred pension trial plan for Shanghai during its annual meeting on January 24, according to a report from China Securities Journal.
The initiative is aimed at luring more individuals to purchase life insurance products so as to buoy the insurance pension industry. Local media reported that leading pension insurance firms, such as China Pacific Insurance Group, will be among the first batch of financial institutions to be awarded the licenses.
Under the agreement, an employer will be able to invest up to 1000 RMB per month in commercial pension products (US$158.7) without facing income tax charges, 700 RMB of which will come from commercial pension products. The remaining 300 RMB will come from an enterprise annuity (EA).
Market pundits expect the initiative to generate additional income of 60 billion to 120 billion RMB for insurance pension firms.
Vanessa Wang, head of pension services, Asia Pacific, global transaction services of Citi, tells Asia Asset Management that the lack of tax incentives in EA as well as pension products has resulted in strong market anticipation regarding the new policy. However, she adds that the pilot scheme is unlikely to be implemented any time soon, noting that the process by which the Ministry of Finance is set to align its view on the pilot scheme with those of the CIRC and other regulators will be slow.
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