China Gets Serious About Taxing Overseas Income (AI Translation)
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文｜财新周刊 程思炜
By Cheng Siwei, Caixin Weekly
近期不少纳税人反映收到来自税务局的短信、电话、个税App提示，要求自查境外收入并依法申报纳税。这在从事港股、美股交易的人群中尤为突出。
Recently, a considerable number of taxpayers have reported receiving text messages, phone calls, or notifications from the tax authorities through the individual income tax app, urging them to conduct self-checks on overseas income and fulfill tax declaration obligations according to the law. This phenomenon has been particularly prominent among individuals engaged in trading Hong Kong and U.S. stocks.
常居上海的向南告诉财新，他在6月中旬收到上海某区税务局的电话，提示他在2023年、2024年两个年度取得境外所得，需自查申报。他称，这两年在老虎证券、富途证券炒美股的确有净盈利，通过券商提供的月结单数据计算年度盈利后，于申报纳税期最后一天即6月30日在个税App申报了相关收入。
Xiang Nan, a longtime Shanghai resident, told Caixin that in mid-June, he received a call from a local district tax bureau in Shanghai, notifying him to self-examine and declare his overseas income for the years 2023 and 2024. He said that in both years, he did indeed make net gains from trading U.S. stocks through Tiger Brokers and Futu Securities. After calculating his annual profits using monthly statement data provided by the brokerages, he declared the relevant income via the individual income tax app on June 30, the final day of the tax declaration period.
中国于1980年出台、经历多次修订的《个人所得税法》一直明确，中国税收居民从境内和境外取得的所得应依法申报纳税。中央财经大学财政税务学院教授何杨对财新表示，对于个人，全球征税主要指对居民的境外所得征税，这是一种较为普遍的做法，只有少数国家和地区（比如香港、新加坡）对居民境外所得免税。但在实践操作中，由于信息获取不易等，境外所得的税收征管一直比较困难，现在随着CRS（共同申报准则）等涉税信息自动交换的推进，境外所得的信息来源更多，税务部门开始关注到这部分收入，因此一些纳税人会感觉到征管加强了。
China’s Individual Income Tax Law, first introduced in 1980 and subsequently amended multiple times, has always stipulated that Chinese tax residents are required by law to declare and pay taxes on income earned both within and outside the country. He Yang, professor at the School of Public Finance and Taxation at Central University of Finance and Economics, told Caixin that for individuals, global taxation mainly refers to taxing residents on their overseas income. This is a common practice internationally, with only a handful of jurisdictions—such as Hong Kong and Singapore—offering exemptions for foreign-sourced income earned by residents. In practice, however, administering tax on overseas income has long been challenging due to difficulties in obtaining accurate information. With the advancement of tax-related information exchanges, such as the Common Reporting Standard (CRS), tax authorities now have broader sources of information on offshore earnings and have turned increased attention to this segment. As a result, some taxpayers have the perception that tax enforcement has tightened.
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- Chinese tax authorities are increasing enforcement on overseas income, especially for individuals trading US and Hong Kong stocks, requiring self-reporting and annual tax payment at a 20% rate on gains and dividends.
- Overseas stock trading losses cannot currently be carried forward to offset future profits, unlike systems in the US where losses may be offset across years with set limits.
- Tax residency in China is determined by domicile or presence over 183 days; Chinese tax residents must report global income, though double taxation credits and limited exemptions exist.
Summary:
Recently, many Chinese taxpayers, especially those engaged in trading Hong Kong and U.S. stocks, reported receiving messages, calls, and app notifications from tax authorities urging them to self-examine and report overseas income as required by law. For instance, a Shanghai resident, "Xiang Nan," was contacted by a district tax bureau about overseas earnings in 2023 and 2024 and was prompted to declare these profits through the individual income tax app before the June 30 deadline. He confirmed achieving net gains by trading U.S. stocks via platforms like Tiger and Futu Securities and duly reported these on the app.[para. 1][para. 2]
China's Personal Income Tax Law, first introduced in 1980 and amended multiple times, has consistently required Chinese tax residents to declare both domestic and overseas income. Tax expert He Yang explained that while only a few jurisdictions like Hong Kong and Singapore exempt overseas income, the international norm is global taxation for residents. The difficulty of obtaining information has historically weakened the enforcement of overseas income taxation, but ongoing global tax data exchange initiatives, such as the Common Reporting Standard (CRS), are enhancing enforcement capabilities. Since joining the CRS in 2015 and conducting its first data exchange in September 2018, China now receives financial account data from over 100 countries and regions.[para. 3][para. 4]
Individual gains from stock trading primarily include capital gains (20% tax under property transfer rules) and dividends (also taxed at 20%). These rates apply uniformly to domestic and overseas income, though A-share capital gains and long-held dividends in China are largely exempt. The complexity lies in the calculation, as Chinese enforcement currently allows annual netting of stock trading profits and losses but disallows cross-year netting. There is also provision for a tax credit for foreign tax paid, though this is less relevant to Hong Kong income, since Hong Kong does not tax gains or dividends.[para. 5][para. 6][para. 7]
In 2025, more taxpayers received notifications to declare overseas income from 2022 to 2024 than in previous years, reflecting strengthened enforcement. In practice, dividends received by mainland investors through U.S. platforms usually have the appropriate U.S. withholding tax deducted upfront (10% for mainland Chinese under the bilateral treaty), while Hong Kong residents typically face 30%. Mainland investors using Shanghai-Hong Kong Stock Connect are temporarily exempt from individual tax on offshore gains until December 31, 2027.[para. 8][para. 9][para. 10]
A further area of enforcement involves income from employee stock options in overseas listed firms. The taxation protocol is complex, with the exercise of options taxed as salary (up to 45%) and subsequent disposal taxed as capital gain (20%). Increased monitoring began only in recent years, after China actively started using CRS data for enforcement.[para. 11][para. 12]
The question of cross-year netting of trading losses—standard in the U.S. and some other jurisdictions—remains unresolved in China, where annual netting is allowed for now. The U.S. offers a clear model, permitting capital losses to offset gains in future years up to certain limits.[para. 13][para. 14][para. 15]
Tax residency hinges on domicile and stay duration: anyone domiciled in China or present for 183 days in a year is a resident, liable for global income tax. The definition of ‘domicile’ extends beyond property to habitual residence based on ties like family or economic interests. Policies for foreign professionals suggest further room for reform, especially to attract and retain talent with targeted incentives for foreign-sourced income.[para. 16][para. 17][para. 18]
Overall, as technical capabilities grow and international data exchange improves, stricter administration of taxes on overseas income is inevitable, prompting calls for more detailed implementation rules and clarity in loss offsetting across years. This aligns with the stated direction of future personal income tax reform, which will aim to unify and broaden the scope of comprehensive income categories and further rationalize the taxation of capital income in China.[para. 19][para. 20][para. 21]
- Tiger Brokers
老虎证券 - Tiger Brokers is an online brokerage that facilitates US stock trading. Chinese tax residents who have profited from US stocks through platforms like Tiger Brokers are being prompted by tax authorities to declare and pay taxes on their overseas income. The article highlights that tax authorities are enhancing enforcement on overseas income due to improved information exchange.
- Futu Securities
富途证券 - Futu Securities is a prominent online brokerage platform. The article mentions that individuals, like Mr. Xiang Nan and Mr. Li Le, use Futu to trade US and Hong Kong stocks. Chinese tax authorities are now scrutinizing offshore income, including gains from platforms like Futu, requiring self-declaration and taxation, with an annual profit/loss offset at a 20% tax rate on stock trading gains.
- PwC China
普华永道中国 - PwC China partner Zhang Jianjing commented on China's tax policy regarding overseas stock transfer gains, stating that allowing annual profit and loss offsetting is reasonable. She also mentioned that whether losses can be carried forward across years depends on national policy.
- Beijing Mingshui Law Firm
北京明税律师事务所 - Beijing Mingshui Law Firm is represented by its director, Wu Libin, who commented on the complexities of calculating and reporting overseas stock trading profits for tax purposes. Wu highlighted the need for clearer guidelines on issues like cost basis calculation (using methods like FIFO or weighted average) and the deductibility of expenses such as commissions and financing costs. These comments reflect concerns expressed by taxpayers regarding accurate reporting of overseas income.
- 1980：
- China’s Individual Income Tax Law was first introduced, establishing the requirement for Chinese tax residents to declare and pay tax on both domestic and overseas income.
- Since the 1990s：
- Gains from stock transfers in China’s A-share market have been temporarily exempt from personal income tax.
- 2015：
- China signed the Common Reporting Standard (CRS) formulated by the Organization for Economic Cooperation and Development (OECD).
- September 2018：
- China completed its first information exchange under the CRS, establishing mutual sharing of financial account data with over 100 countries and regions.
- By 2018：
- China had switched from a fully categorized individual income tax system to a semi-comprehensive system, consolidating four types of income for tax purposes.
- 2019：
- The Ministry of Finance and State Administration of Taxation issued an announcement on residency determination for individuals without domicile in China, clarifying overseas income tax exemption conditions for certain foreigners.
- 2020：
- Announcement on Individual Income Tax Policies Related to Overseas Income issued by the Ministry of Finance and the State Taxation Administration.
- 2023：
- Taxpayers like Xiang Nan and Li Le referenced this year regarding their overseas investment gains/losses, and policy tightening accelerated around this time.
- March 2024：
- Wu Qi’s stock options vested and were converted to shares, showing relevant wage and salary income and tax paid in the individual income tax app.
- September 2024：
- Wu Qi sold some of her shares after the company’s stock price increased; possible capital gains taxation was unclear.
- May and June 2025：
- A marked increase in the number of taxpayers receiving notifications from local tax bureaus to declare overseas income, mainly concerning income earned 2022–2024.
- Mid-June 2025：
- Xiang Nan received a call from the Shanghai district tax bureau, urging declaration of overseas income for years 2023 and 2024.
- Late June 2025：
- Li Le received a call from tax authorities in Hunan advising that he was on the 2023 watchlist for overseas income and required to self-assess.
- June 30, 2025：
- Xiang Nan declared his relevant overseas income via the individual income tax app; Wu Qi received a text message from a Beijing tax bureau to self-examine domestic and overseas income.
- July 18, 2025：
- The financial self-media account 'Maobidao' published an article describing receiving a call from a Beijing district tax bureau about overseas investment account and tax matters more than 20 days prior.
- As of 2025：
- China uses a 20% tax rate for most capital income, with higher rates (up to 45%) for comprehensive income; capital income is subject to laxer tax enforcement compared to wage income.
- As of 2025：
- China has implemented tax exemption policies for foreign nationals concerning overseas income as per 2019 standards, dependent on residence duration and domicile status.
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