The long-awaited authoritative clarification on VAT treatment of reinsurance in China has been announced.
On 18 June 2016, the Ministry of Finance (MOF) and the State
Administration of Taxation jointly issued Circular Caishui [2016]
68 (Circular 68) which provides a supplementary explanation on the
reinsurance arrangement under the VAT Regime. The Circular has a
retrospective effect, backdated to 1 May 2016.
Circular 68: two scenarios of VAT treatment on reinsurance
Firstly, VAT is exempt when an insurance company which is
established within mainland China provides reinsurance services to
another insurance company established outside of mainland China,
and the service is completely consumed outside of mainland China.
Secondly, VAT registers which provide reinsurance services within
mainland China shall follow the VAT rules that are imposed on the
underlying insurance policies. Where a reinsurance contract covers
several different insurance contracts and all the
