06/06/25

CHINA: China widens tax crackdown to middle-class overseas investors

As published on: msn.com, Friday 6 June, 2025.

China is intensifying efforts to tax citizens’ overseas income, expanding a campaign that once focused on the ultra-rich to now include less wealthy individuals.

The broadened crackdown is part of Beijing’s attempt to boost fiscal revenue amid record budget deficits and economic headwinds, Bloomberg reported, citing people familiar with the matter.

Tax officials are now scrutinising a wider range of offshore income, including investment returns, dividends, and employee stock options, Bloomberg said.

These investment gains can be taxed at rates as high as 20 per cent. While last year’s campaign largely targeted individuals with assets exceeding $10 million, tax service providers are now seeing a surge in enquiries from clients with less than $1 million in assets.

Broader surveillance as deficits soar
The stepped-up enforcement comes as Chinese authorities seek to shore up revenue amid a weakening economy, rising stimulus spending, and diminishing local government income from land sales.

According to Bloomberg calculations based on official data, China’s budget gap in the first four months of 2025 soared by more than 50 per cent year-on-year to over $360 billion—a record for the period.

Total income in the central government’s two main fiscal accounts fell by 1.3 per cent from a year earlier, while expenditures surged by 7.2 per cent, exacerbating the deficit. Beijing’s stimulus measures, aimed at mitigating the impact of US tariffs and reviving domestic confidence, have increased pressure on the public coffers.

Tax bureaus in cities such as Beijing and Shanghai, as well as provinces including Zhejiang, have issued public advisories urging residents to review and report their offshore income before the June 30 deadline for 2024 income declarations.

According to Bloomberg, notices issued by the local governments show that they began coordinating enforcement efforts as early as March, after big data analysis revealed a number of residents had not reported overseas gains.

In some cases publicised by tax authorities, individuals were asked to pay back overdue tax and penalties amounting to just over 127,000 yuan ($17,720), underscoring how enforcement is now reaching middle-income earners.

Data sharing and the global tax net
China’s latest tax push builds on its adoption of the Common Reporting Standard (CRS) in 2018—a global tax information-sharing framework developed by the OECD to combat tax evasion. Through CRS, China automatically receives data from nearly 150 jurisdictions regarding financial accounts held by Chinese residents abroad.

While China’s tax laws have long mandated that residents declare and pay tax on worldwide income, enforcement had been lax until recent years. The shift coincides with President Xi Jinping’s “common prosperity” campaign, aimed at narrowing wealth gaps and increasing redistribution in the country.

Amid domestic uncertainty, more Chinese investors have sought to move wealth abroad. Bloomberg data shows that mainland investors have funnelled over HK$658 billion ($83.9 billion) into Hong Kong-listed stocks via the cross-border trading link this year—more than double the outflows during the same period in 2024.

Bloomberg Intelligence forecasts that personal investable assets in mainland China could soar to $80 trillion by 2030, with overseas investments rising to 11 per cent of household investable wealth, up from 8 per cent in 2023.

As Beijing broadens its tax net and enhances surveillance of offshore wealth, analysts say middle-class Chinese investors with modest foreign holdings are increasingly likely to come under scrutiny. With the deadline looming and enforcement ramping up, the message from Chinese tax authorities is clear: no overseas income is too small to escape attention.

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China Tax crackdown Tax the rich