Ultra wealthy to feel tax crunch on overseas gains

Bloomberg and staff reporter

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.

A number of wealthy individuals in major Chinese cities were either 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, the sources said.

The individuals contacted are facing up to 20 percent levies on investment gains and even penalties on overdue payments for some, although the final amounts are negotiable, the sources said.

They added that some of the targeted Chinese had at least US$10 million (HK$78 million) in offshore assets, while others were shareholders of companies listed in Hong Kong and the United States.

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 country.

China's tax push follows its 2018 implementation of the Common Reporting Standard, 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.

Under the CRS, China has been automatically exchanging information with nearly 150 jurisdictions about accounts subject to taxes in each member country for the past six years.

China's wealthy have been under the spotlight since Xi unleashed a multiyear crackdown that ensnared the consumer internet, finance and property sectors.

Alibaba founder Jack Ma Yun has been largely out of public view following the regulatory clampdown in 2020. Ma was said to own a Hong Kong ID card, but was not a permanent resident.

ByteDance founder Zhang Yiming, who became the richest person in China on Forbes' list last month, lives in Singapore but has retained his Chinese citizenship.

China has also seen a spike in emigration by affluent citizens, with more than 1.2 million people leaving since 2021, according to United Nations data.

A report from investment migration firm Henley & Partners showed that China is expected to see a record exodus of 15,200 high-net-worth individuals in 2024 after posting the biggest outflow last year.

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