Citigroup released a research report stating that the recent announcement by the Ministry of Finance and the State Taxation Administration regarding corporate income tax treatment for the transition of insurance contract accounting standards will likely have a one-time impact. As listed insurance companies already adopted IFRS 17 at the beginning of 2023, this adjustment is expected to reflect the one-time impact on retained earnings from the initial adoption of the standard, as well as differences in taxable income calculated under the old and new standards for the period from 2023 to 2025. The related adjustments can be chosen to be fully reflected in the 2026 fiscal year or averaged over a five-year period starting this year.

Citigroup believes the transition to the new accounting standards will enhance the transparency of insurers' financial data, and the five-year transition period is expected to mitigate the related effects. For domestic insurers that switched to the new accounting standard in early 2023 but have continued using the old rules for tax treatment, corresponding tax adjustments are anticipated. The extent of the tax impact is estimated to depend on several factors, including the tax effect of changes in retained earnings from the initial adoption of the new rules, the differences between the old and new standards from 2023 to 2025, the expected trend of net profit in 2026 and the subsequent five years, and the amount and eligibility status of deferred tax assets. The impact is believed to be only a one-time event.