New Delhi, Aug 6 (IANS) China’s decision to impose a 20 per cent tax on offshore trusts has set off a scramble among the country’s ultra-rich families, trustees and advisers in Hong Kong and Singapore to raise cash to pay outstanding amounts, a new report has said.
These families are in a rush to assess liabilities and find cash to meet a tight compliance deadline of October 22, a report from CNBC said, adding that late filings or non‑payment will attract surcharges.
China’s Ministry of Finance, on July 24, issued a guideline that requires offshore trusts linked to Chinese residents to pay a 20 per cent levy at nearly every stage of a trust’s life, from establishment to profit distribution and termination.
“Families need to declare and pay outstanding amounts on assets transferred into such trusts from the start of 2023,” the report said.
Hong Kong, Singapore, British Virgin Islands and the Cayman Islands are favoured destinations for China-linked families to set up trust structures.
The report cited a law firm reporting a surge of calls from wealthy families, private banks, trust companies, and insurers who want to know whether they are affected by the new rules.
Stakeholders of these trusts are assessing the size of the tax bill, ways to settle it before the grace period expires, while some are already weighing which assets to sell.
The report mentioned a report by KPMG and the Hong Kong Trustees’ Association, saying assets held under trusts in Hong Kong reached $667 billion in 2023, with 55 per cent of the underlying investments located in mainland China and Hong Kong.
The Chinese government imposed taxes on wealthy families to raise new sources of fiscal revenue as land sales – which used to be a major contributor to budgetary financing – collapsed amid a broader economic slump.
The Chinese administration also has imposed measures to cut capital flows out of the country, including banning three cross-border online brokerage firms from the country earlier this year.
—IANS
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