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'Exempt and tax' model set for H2

A SCHEME that will let people defer tax payment on individual pensions is set to be finalized in the second half of this year, a source said.

The plan is one of Shanghai's innovations under the guidelines of the State Council, China's Cabinet, to build the city into a major financial hub by 2020.

A team comprising regulators and insurers, including China Life Insurance and China Pacific Insurance, has been set up to oversee the scheme, the unnamed source said.

The "exempt and tax" scheme is a mechanism that will let policyholders not pay tax on pensions when they buy policies and pay tax when they ultimately withdraw their profits. The program will be an incentive for people to buy retirement policies and boost insurers' pension products. The practice is already popular in Western countries.

A cap will be set on the investment to avoid possible tax evasion. But details such as the cap and how the tax will be collected are still being discussed, the source said.

"The scheme is not only an issue in the insurance industry, but is also relevant to bodies like tax and finance authorities," the source said.


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