(Yicai) Aug. 7 -- The law has always required Chinese mainland residents to declare and pay taxes on offshore investment proceeds, the Hong Kong Insurance Authority said after concerns arose from reports that some mainlanders were asked to pay individual income tax on income from Hong Kong insurance policies.

The market should not read too much into or speculate on this matter, as the law about paying taxes on offshore investment income has always existed, the IA told Yicai yesterday.

Tax authorities in Beijing, Hangzhou, and other cities have begun levying a 20 percent individual income tax on dividend payouts and interests earned on prepaid premiums under Hong Kong insurance policies, Caixin recently reported.

Family office executives and tax lawyers interviewed by Yicai yesterday said none of their clients had received notices to pay individual income tax on Hong Kong insurance policy income, adding that such taxation is legally grounded and within expectations. However, some legal professionals said they had previously handled similar cases.

"The Hong Kong government and the IA are closely monitoring the latest developments in the mainland tax arrangements related to financial products, and will maintain close communication with the industry," the IA said.

Chinese mainland residents' taxable income includes money earned both within and outside China, according to China's various tax regulations. Interests, dividends, bonuses, income from property leasing and property transfer, and incidental income are subject to a flat tax rate of 20 percent. Offshore income is taxed separately.

"The Hong Kong insurance market is mature, with flexible and sophisticated product design that offers currency choice, global asset allocation, life planning, and wealth succession services, which we believe hold appeal for mainland clients," the IA noted.

New premiums from mainland investors purchasing insurance products in Hong Kong reached HKD59 billion (USD7.6 billion) in 2023 and rose 6.5 percent to HKD62.8 billion in 2024, accounting for nearly 29 percent of the city's total new premiums and nearing the HKD72.7 billion peak in 2016, according to IA data.

The regulator stopped publishing separate statistics for mainland visitors last year.

Editor: Futura Costaglione