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New Tax Policy July 2017

A. On 19th May 2017, China's State of Administration of Taxation (SAT) issued a new guidance, the Bulletin 16. It requires the specification of the taxpayer identification number of the unified social credit number on a VAT general invoice.

B. On 28th April 2017, Ministry of Finance, China Insurance Regulatory Commission and State Administration of Taxation jointly issued Circular Cai Shui [2017] No. 39 (Circular). The new Circular regulates the tax deductibility of the expenses for purchasing qualifying commercial health insurance products by individuals.

A. Highlights of Bulletin 16

Use of taxpayer identification number or unified social credit number on VAT general invoices From 1st July 2017, when an enterprise is involved in a VAT-able transaction as purchaser and it requests a VAT general invoice from the seller, the buyer (the enterprise) shall provide its taxpayer identification number or unified social credit number to the seller. The term “enterprise” is broadly defined. Corporation, noncorporate enterprise, branch office, partnership, sole proprietorship and other forms of enterprises are all included in the definition of enterprise. The seller must complete the column “TIN of purchaser” on the VAT general invoices. VAT general invoices lacking TIN of purchaser won’t be considered a valid supporting document for tax purpose.

Authenticity of invoice information

Bulletin 16 highlights that it is essential for all information in a VAT invoice to be consistent with the facts underlying the transaction; a seller might not issue a VAT invoice that contains incorrect price information, sales volume, or other information even when this is requested by the buyer. Many taxpayers, to simplify the invoicing process, have interfaced their sales platform Systems with a VAT invoice management system so to import the invoicing data into the system automatically. Considering this situation, Bulletin 16 precisely requires sellers to ensure the consistency between the invoicing data exported from the sales platform and the actual transaction.

B. Highlights of Circular

As of July 1, 2017, pilot policies for individual income tax on commercial health insurance shall be promoted nationwide. "

Issues concerning Policy Contents

The expenses regarding the purchase of qualifying commercial health insurance products by individuals are tax deductible to the amount of CNY 2,400 per year when the taxable income is calculated in the current year, or to the extent of CNY 200 per month when taxable income is calculated in the current month. If the above considered expenses for commercial health insurance products are purchased for the employees by the employer, they must be included in individual salaries of the employees as if the products were purchased by the employees and are deductible within the above limit. The considered limit of deduction, CNY 2,400 per year or CNY 200 per month, qualifies for a deduction on its own and goes beyond the standard deductions prescribed by individual income tax laws.

Issues concerning Applicable Targets