Beijing Wants to Tax Income of Overseas Chinese
Vittorio Hernandez | | Jan 09, 2015 04:28 AM EST |
(Photo : Reuters) Chinese nationals cross to Cambodia from Vietnam at the Bavet international checkpoint in Svay Rieng province May 15, 2014. Hundreds of Chinese nationals have fled to Cambodia to escape anti-China riots in Vietnam in which at least 20 people are reported to have been killed, Cambodian police said on Thursday. REUTERS/Samrang Pring (CAMBODIA - Tags: CIVIL UNREST POLITICS)
With millions of Chinese now working overseas, Beijing is eyeing their income so it could collect taxes on these. Ahead of collecting taxes, China is asking its citizens to report their income earned abroad.
Expected to be affected by this are Chinese billionaires who set companies in the Caribbean, those employed in Africa and Latin America and even property owners who are renting their estates in Canada, UK, U.S. and Australia where foreigners are allowed to own real estate, reports the New York Times.
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The national and local tax offices now seeking information are just enforcing an old law that few Chinese are aware of which mandates the payment of domestic taxes on all income, regardless of where it is earned.
The renewed zeal in implementing that little-know, but difficult-to-implement law, could be because of the relatively low compliance with the regulation, especially among overseas Chinese, said Edmund Yang, Pricewaterhouse Coopers partner for international assignments in Beijing.
With the exception of the U.S., most progressive western countries don't tax the income of their citizens earned overseas.
Since the U.S. model is the benchmark for nations that want to tax their citizens' income earned outside the country, Beijing sent a team to California and New York. Led by Lili Zheng, an accountant from Deloitte and co-leader of the company's international investment practice, the group also visited the Internal Revenue Service which gave them a copy of the U.S. tax code and IRS rules. The former is made up of two volumes, while the latter has five volumes.
Among the reasons why Europe does not tax the income of its citizens earned overseas is that they use less government service such as health care, but many of them significantly help boost exports.
To further ensure future investments are taxable, the State Administration of Taxation in Beijing issued new rules effective February 1 that prohibits several types of international investments that are tax shelters.
Officials from Guangzhou, where many companies are located, will meet on January 28 with 150 representatives from big corporations to remind them that their staff deployed abroad are still liable to pay local income tax.
The enforcement of the country's tax law also aims to net corrupt Chinese officials who have escaped to other countries.
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