China Cracks Down on Wealthy Citizens' Overseas Assets
China has launched a massive tax investigation into the overseas assets of its wealthy citizens to collect hundreds of trillion won worth of unpaid taxes, according to a report in the Financial Times.
The move is aimed at resolving the financial difficulties caused by the long-running real estate recession in China. Authorities are reviewing the details of the wealthy's overseas investments and checking whether they have properly reported their income to the tax authorities.
The investigation will cover assets such as real estate, stocks, precious metals, and cryptocurrencies. Several government officials said that some cases date back 25 years, suggesting a long-standing issue with unpaid taxes.
China's fiscal income has stagnated since COVID-19, falling 1.7% year-on-year to 21.6 trillion yuan (about 4,556 trillion won) last year. Land sales income, a key source of budget income for the Chinese government, plummeted from 8.7 trillion yuan in 2021 to 4.15 trillion yuan last year.
The Chinese government is also strengthening its tax efforts on offshore trusts used by ultra-high-value asset owners to invest abroad. Income generated from these trusts will be taxed at a 20% rate across several stages, eliminating the previous advantages of using trust structures to avoid income tax.