A major change in the tax regime took place on 1 January 2019 with the authorities starting to look at different assets and investment holdings more closely than ever before, causing China’s richest to look for contingency plan.
Several among the Chinese wealthy have already started looking into overseas trusts to transfer their assets and investments into.
Personal wealth in China is estimated to have reached a record high in 2018 – approximately $24trn (£19trn €21trn) – $1trn of which is already held overseas.
Chinese owners of offshore companies will not only have to pay taxes on dividends, but will also face levies up to 20% on corporate profits made through their offshore business, according to media reports.
The move was decided in order to block the wealthy from taking refuge and avoid paying tax on trusts and companies based overseas.
Before the new legislation, the wealthy could also avoid paying tax by obtaining a foreign passport (or green card) and keeping their Chinese citizenship at the same time.
However, from 2019, the Chinese government will start taxing the global income of all Chinese nationals regardless of any other additional nationalities.
Even ‘gifts’, under the form of assets, to relatives or friends could fall under the microscope of the Chinese regulators and could be subject to taxation as well.
Furthermore, the Chinese government is ready to introduce a property tax law as soon as 2020, to crackdown on multiple property holders.