HONG KONG – China has begun enforcing a long-overlooked tax on overseas investment gains by the country’s ultra-rich, according to people familiar with the matter.
Some wealthy individuals in major Chinese cities were told in recent months to conduct self-assessments or summoned by tax authorities for meetings to evaluate potential payments, including those in arrears from past years, said the people.
The move underscores growing urgency within the government to expand its sources of revenue as land sales tumble and growth slows. It also aligns with President Xi Jinping’s “common prosperity” campaign to create a more equal distribution of wealth in the world’s second-largest economy.
The individuals contacted are facing up to 20 per cent levies on investment gains, and some are also subject to penalties on overdue payments, said the people, adding that the final amount is negotiable.
China’s tax push also follows its 2018 implementation the Common Reporting Standard (CRS), a global information-sharing system aimed at preventing tax evasion. While local regulations always stipulated that residents be taxed on worldwide income, including investment gains, it has rarely been enforced until recently, said the people.
It’s unclear how widespread the efforts are and how long they’ll last, the people said. Some of the targeted Chinese had at least US$10 million (S$13 million) in offshore assets, while others were shareholders of companies listed in Hong Kong and the United States, according to the people.
China’s tax bureau didn’t respond to a request for comment.
Under the CRS, China has been automatically exchanging information with nearly 150 jurisdictions about accounts belonging to people subject to taxes in each member country for the past six years.
“China already has a treasure trove of CRS data which the tax authorities could readily mine to uncover collection opportunities,” said Patrick Yip, Deloitte
