According to the Notice of State Taxation Administration of The People's Republic of China of the Ministry of Finance on Issues Concerning Enterprise Income Tax Policies for Supplementary Endowment Insurance and Supplementary Medical Insurance (Caishui [2009] No.27), since 2008 1 month 1 day, the supplementary endowment insurance and supplementary medical insurance paid by enterprises for all employees who are employed or employed in the enterprise shall not exceed 5% of the total wages of employees respectively. The excess shall not be deducted.

When an enterprise pays supplementary old-age insurance premiums and supplementary medical insurance premiums for some employees, it should multiply the reasonable average annual salary of all employees by the product of the number of insured persons as the base for calculating the pre-tax deduction of supplementary old-age insurance premiums and supplementary medical insurance premiums, and deduct them in accordance with the tax provisions.

According to the Notice of State Taxation Administration of The People's Republic of China on Deduction of Enterprise Wages and Salaries and Employee Welfare Expenses (Guoshuihan [2009] No.3), supplementary endowment insurance and supplementary medical insurance are not included in the expenses of employee welfare expenses. Therefore, if an enterprise allocates supplementary old-age insurance premiums and supplementary old-age insurance premiums in the accounts payable for welfare expenses in accordance with the relevant provisions of the financial accounting system, on the one hand, the enterprise can reduce the actual employee welfare expenses in the current period within the standards stipulated by the tax, and deduct them before tax in accordance with the tax provisions; On the other hand, enterprises can directly include the actual supplementary endowment insurance and supplementary medical insurance that meet the tax provisions into the current profits and losses, and those that fail to pass the accounting of welfare expenses payable shall be deducted before tax according to the tax provisions, and the taxable income shall be increased if the tax is exceeded.