Analysis: China’s Tax Dragnet Closes In on Overseas Assets

In July 2025, Beijing’s tax authorities initiated a targeted campaign to verify the overseas income of Chinese individuals. Many investors holding foreign assets received requests via text or phone to self-report and pay back taxes on foreign investment income accrued during the 2022 to 2024 tax years. The campaign’s scope covers income sources such as gains from Hong Kong and U.S. stock trading, interest from overseas bank deposits, and other earnings generated abroad. The policy is propelled by data sharing using the Common Reporting Standard (CRS), which has enabled more systematic access to information about Chinese residents’ overseas financial accounts. For example, proceeds from U.S. property sales deposited in Macao, or rental income from Australian properties that’s remitted to overseas accounts, are reported to Chinese authorities via CRS and trigger back tax obligations. The focus remains on investors with trading profits and interest income from Hong Kong, making them principal targets of the tax drive [para. 1][para. 2].

The tax authorities are primarily focusing on the individual income tax, rather than the full range of China’s 18 tax categories. This is because individual income tax is calculated on a worldwide basis for Chinese tax residents—those domiciled in China or spending at least 183 days there annually—requiring them to declare and pay tax on all global income. By contrast, taxes like value-added and consumption taxes only apply to domestic activities. Some investors question why income such as domestic bank interest or gains from A-share trading is exempt, while overseas equivalents are taxed. The answer lies in geographically specific policy exemptions—these only apply to domestic activity or certain structured cross-border investments, not to direct international holdings. Thus, interest from overseas banks and profits from direct overseas stock trades do not enjoy the same exemptions [para. 3][para. 4].

For capital gains from foreign stock trading, the tax law stipulates a 20% rate on a per-transaction basis, without providing for the offsetting of losses. Given the high frequency of trading, this could lead to excessive taxation. However, if investors can provide proof that per-trade calculation is unfeasible (e.g., full transaction logs), authorities may accept annual net profit as the taxable base. Dividends are taxed separately at the same 20% rate. Flexibility is thus sometimes available in calculation methods, but proper documentation is essential [para. 5].

In cases of late payment, only principal and interest (late fees), normally calculated at 0.05% daily (roughly 18.25% per year) with no upper limit, are typically charged. Penalties are generally avoided if taxpayers comply after notification. However, the longer the overdue period, the greater the accumulated late fees can be—so prompt action is advised to minimize additional costs [para. 6].

Implementation of CRS since 2018, spanning over 110 jurisdictions, provides tax officials with detailed account and transaction data—including names, account details, year-end balances, and income flows. For the current campaign, CRS data for 2022–2023 is particularly relevant. When contacted, some taxpayers reported that officials already had precise figures for their overseas accounts. The integration of CRS with the latest phase of China’s “Golden Tax System” has enabled tax authorities to shift from broad to highly precise enforcement, expanding not only in Beijing but also in major economic regions since early 2025. This integrated, technology-driven approach signals both increased thoroughness and broader geographic reach in enforcement [para. 7][para. 8].

For compliance, authorities recommend proactively reporting income, optimizing investment channels (such as using the Southbound Stock Connect for Hong Kong stocks, which maintains tax-exempt status), and considering asset planning through insurance or trusts, which remain less clearly regulated. Strategic residency planning—including possibly changing one’s tax residency—can also mitigate tax exposure, but requires careful adherence to local and Chinese rules [para. 9][para. 10][para. 11][para. 12].

Ultimately, with the expansion of CRS and digitalized enforcement, “invisible income” from overseas investments is rapidly disappearing. Chinese tax residents must recognize that overseas income has always been taxable, and should now embrace compliance as a key step in safeguarding global assets [para. 13].