INSUBCONTINENT EXCLUSIVE:
China lowered threshold for blocking citizens with overdue taxes from leaving country.China's plan to cut taxes in 2019 for masses has
nation's super-rich running for cover on concern government will make up shortfall by going after wealthy.Changes to tax regime as of
1 mean authorities will be paying closer attention to assets and investment holdings
In a nation where personal wealth is estimated to have climbed to a record $24 trillion in 2018 -- $1 trillion of which is held abroad --
that potentially offers rich pickings
Anxiety over how new rules will be enforced has already triggered a flood of Chinese clients seeking to create overseas trusts.Tougher taxes
at home could have implications beyond China's shores, with country's wealthy having been on a buying binge in recent years, driving up
prices for everything from property in Vancouver and Sydney, to famous artworks and fine wines.The State Administration of Taxation didn't
respond to a faxed request for comment.Here's how new tax rules may affect -- and rein in -- China's rich:- - - Crackdown on HavensUnder new
rules, owners of offshore companies will not only pay taxes on dividends they receive but will also face levies of as much as 20 per cent on
corporate profits, from as low as zero previously
This has triggered a flood of rich families seeking refuge via trusts, which often shield wealthy owners from having to pay taxes unless
trusts hand out dividends
Overseas buildings or shell companies are also becoming easier to track for authorities as China embraces an international data-sharing
agreement known as Common Reporting Standard, or CRS.It's not clear how government will utilize CRS data, especially in early 2019, but
authorities may grant amnesty for a certain period for a stable transition or focus on penalizing biggest offenders, according to Jason Mi,
foreign passport or green card, while keeping their Chinese citizenship
But this won't work starting in January as government will tax global income from all holders of "hukou" household registrations -- most
encompassing way of identifying a Chinese national -- regardless of whether they have any additional nationalities.That's prompted many
people to give up their Chinese citizenship in 2018 by surrendering their "hukou" to avoid paying taxes on foreign income from Jan
1, according to Peter Ni, a Shanghai-based partner and tax specialist at Zhong Lun Law Firm
Starting in 2019, people surrendering Chinese citizenship will need to be audited by tax authorities first and possibly explain all their
sources of income, according to Ni.- - - Reining in GiftsTycoons transferring assets to relatives or third parties could be subject to
taxation in new year, depending on how strictly China enforces rules on gifts, according to Ni at Zhong Lun
The levies could reach as much as 20 per cent of asset's appreciated value, according to Ni.For example, if a tycoon were to transfer
overseas shares worth $1 million to his son for free, and if those shares originally cost tycoon $100,000, tycoon could be taxed 20 per cent
of $900,000 increase in value of those shares, or $180,000.The risk of getting taxed will be higher if recipient is a foreigner because
their assets may be beyond Chinese officials' reach, according to Ni.- - - Tougher TaxmanTax authorities will sharpen their scrutiny of
high-net-worth individuals thanks to more modern tools at their disposal, according to Ni
One is Golden Tax System Phase III platform that's being increasingly used to chase down people's entire source of income
The system allows authorities to view various tax-related data, which had been scattered across various government departments, in one
The new system also beefs up identification process by preventing individuals from divvying up their income across multiple sources or ID
numbers to pay lower taxes.But it's not just rich that may face a stricter tax environment
China lowered threshold for blocking citizens with overdue taxes from leaving country to 100,000 yuan ($14,600) from previous threshold of 1
million yuan, according to official Xinhua news agency.- - - Eyes on PropertyFurther down road, China is preparing to introduce a property
tax law that could go into effect as soon as 2020
Though tax rate and details remain unclear, prospects of tax has caused people with multiple apartments to worry and made properties a less
desirable investment tool, EY's Mi said.(This story has not been edited by TheIndianSubcontinent staff and is auto-generated from a
