China’s tax authorities to target non-residents
October 31, 2016 Category Finance, Weekly
The State Administration of Taxation (SAT) wants to collect financial information of non-residents who live in China as it takes part in a multilateral scheme to crack down on tax shelters. By exchanging information with other countries, China will be able to levy taxes on overseas financial assets, which means the days of not paying tax on foreign assets will soon end. SAT released a draft plan on October 14, in which financial institutions will be required to perform due diligence on financial accounts of foreign residents in tax matters according to Common Reporting Standard released by the Organization for Economic Cooperation and Development (OESO), aiming to help other nations protect their tax income. The move comes after China signed a multilateral agreement in December last year, which provides a mechanism to facilitate the automatic exchange of information in tax matters with other participating countries. The practice is set to start from January next year for all new financial accounts and the information collected will be exchanged with other participating countries, with the first exchange to take place in September 2018. China aims to complete due diligence on existing accounts of individuals with assets exceeding CNY6 million and companies with assets exceeding CNY1.5 million by the end of next year. Information collection on other accounts will be completed by the end of 2018. While China will hand the information to other countries, it will also get information on Chinese nationals’ overseas accounts. “For Chinese individuals, the move will enable the government to have necessary information to levy taxes on their overseas assets,” said Ye Weiwen at Deloitte in Hong Kong. “It signals that the days of paying no tax to the government on overseas income will end soon, especially for high net worth individuals.” The news comes as an increasing number of Chinese nationals are seeking to transfer their assets overseas, given the sharp depreciation of the yuan, the South China Morning Post reports.
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