Across The Border | Is the new financial information swapping scheme a ticking bomb for China’s richest?
The internationally accepted Common Reporting Standard is to be adopted in China and Hong Kong by 2018
Some of China’s richest individuals – who have been transferring substantial assets overseas for decades – could be vulnerable under a new schemeannounced recently, that tax agencies in Hong Kong and mainland China can collect non-residents’ financial information, starting this year.
However, tax experts say such high-net-worth individuals probably don’t need to worry too much, as the scheme will not necessarily lead to the mainland tax agency tracking down residents who are going to have their information reported by the overseas countries in which they have those assets.
“There are a number of people who have misunderstood the Common Reporting Standard (CRS) plan,” said Stella Fu, a Shanghai-based senior tax partner at PwC.
“It doesn’t necessarily mean whoever has overseas assets will have to pay double taxation.”
She explained the CRS is mostly being seen as a means by which the mainland’s tax authorities can get more of an idea of the overseas financial status of wealthy Chinese nationals, and that the authorities could use that as an extra reference to decide whether they will get in contact with certain people.
“The situation also might vary between different Chinese provinces,” she said. “If tax agencies in certain provinces think they have achieved their annual financial goals then they might not be that aggressive in tracking down residents who have overseas assets, even if they have those people’s information.”