China Wants US Style Citizen Taxation to Cut Overseas Avoidance

As Chinese individuals and companies head overseas in greater numbers, the country’s tax authorities are starting to follow.

The Beijing billionaires who set up cryptically named companies in the British Virgin Islands to hold their fortunes are in the cross hairs. So are the Guangdong salesmen living and working in Africa and Latin America. China’s tax officials are now demanding that citizens start reporting exactly how much money they earn overseas.

In asking for this information, national and municipal tax agencies in China are quietly beginning to enforce a little-known and widely ignored regulation: Citizens and companies must pay domestic taxes on their entire worldwide incomes, not just on what they earn in China.

The nascent campaign this winter puts China on the same side as the United States in a global debate over whether taxation should be primarily national or global. On the other side of the issue are European nations, Japan, Australia and Canada, all of which tax people within their borders but exempt most expatriates and overseas subsidiaries from paying income taxes in their home countries.

“The newest element is the Chinese tax authorities’ deciding to more strictly enforce this worldwide taxation, which has always been required of Chinese individuals,” said Edmund Yang, a PricewaterhouseCoopers partner in Beijing for international assignments. “The level of compliance among Chinese nationals overseas has been relatively low.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza