China has expanded efforts to recover unpaid taxes from wealthy individuals, widening scrutiny of overseas investment gains and other income as pressure on public finances grows.
The campaign is reaching far back. In some cases, authorities are reviewing tax matters dating to 2000, according to a Financial Times report.
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The push comes as Beijing also moves to tighten oversight of outbound capital flows.
Chinese banks and other financial institutions have been instructed to examine overseas investments held by affluent clients and check whether related income was properly declared to the tax authorities, the FT reported, citing foreign officials, Chinese bankers and family office managers.
The review is part of a broader set of tax measures aimed at high-net-worth individuals. These include increased attention on offshore trusts.
Officials are focusing on gains from a range of assets, including property, equities, precious metals and cryptocurrencies.
The retrospective nature of the campaign has been confirmed by several officials, bankers and advisers cited by the FT. In some instances, reviews stretch back more than 25 years.
Banks have also increased co-ordination with tax authorities in recent months. A banker in southern China told the newspaper that accounts belonging to wealthy depositors have been frozen until officials are satisfied that taxes linked to overseas assets, accounts and trusts have been paid.
“The normal practice is that those wealthy people will immediately pay the fines and taxes in cash to reactivate their account,” the banker said.
The time periods under review appear to vary.
In one example, the head of a Shenzhen family office said clients were asked to pay taxes on gains from offshore assets covering 2017 to 2022. No reason was given for the focus on that period.
Victor Shih, professor of Chinese political economy at the University of California San Diego, told the publication that motivation behind the campaign was “clearly a fiscal one”.
Separately, China last month introduced broad new tax rules covering assets transferred into offshore trusts, according to a joint statement from the finance ministry and the national tax bureau.
The changes close a route long used by wealthy individuals to shield assets overseas. Under the new rules, income generated by offshore trusts will be taxed at 20% at multiple stages.
