According to a source released on the website of the Ministry of Finance ("MOF") on November 4, 2022, the MOF and the State Taxation Administration ("STA") have released the Announcement of the Personal Income Tax Policies on Private Pensions, clarifying that preferential deferred tax policies would be implemented on private pensions.
Private pension is a system supported by government policies, voluntary participation by individuals, marketization operation and supplementary function of pension insurance. Private pension system of personal accounts, capture expends fully borne by the participants personal, choose to buy conform to the provisions of the savings and wealth management products, commercial endowment insurance, public funds and other financial products (hereinafter generally referred to as the personal pension products), practice accumulation, completely in accordance with the relevant state regulations, enjoy preferential tax policies.
Participants in private pension shall be workers who participate in the basic pension for urban workers or the basic pension for urban and rural residents within the territory of China. People who participate in private pensions should open a private pension account on the information platform.
It is clarified that the country has begun to implement preferential deferred tax policies on private pensions since January 1, 2022. Specifically, an individual's contribution to the private pension fund account can be deducted from the comprehensive income or operating income for the actual amount based on the upper limit of 12,000 yuan/year, investment income included in private pension fund accounts is temporarily exempted from the personal income tax, and private pensions received by an individual would not be included in the comprehensive income but calculated separately for payment of the personal income tax at the tax rate of 3 percent, and the tax paid would be included in the "income from wages and salaries" item.