(Yicai Global) May 22 -- A new Chinese tax policy will see residents required to declare their global income in a bid to cut down on tax evasion through overseas accounts, the State Administration of Taxation and Ministry of Finance said.
The document mainly takes aim at foreigners with financial accounts or assets in China, said Wang Lei, managing partner of PricewaterhouseCooper China's private client service center. The regulation will make little difference to Chinese citizens, he added.
The policy will take effect from July 1, and says financial institutions should collect and check financial account information of foreign residents in a comprehensive manner. They should check account holder names, the account's balance or value, interest or dividends earned and income obtained from the sale of financial, but not physical, assets. The data must be reported to the tax administration as a foundation for an information exchange between it and tax authorities in other countries in 2018.
The cross-national exchange will make overseas accounts more transparent, insiders told Yicai Global. This will make it more convenient for tax offices looking to prevent tax evasion through foreign accounts.
As a large proportion of individuals with a high net worth living on the mainland settle accounts in Hong Kong and Singapore, the exchange between the mainland and these two regions should be a top priority, Wang said.
China hopes to complete its due diligence on high-net-worth residents with net assets worth more than USD1 million by the end of this year, and such residents with less than USD1 million in assets by late next year, according to the document.