CHINA: An Introduction to Private Wealth Disputes

Common Legal and Tax Disputes in Private Wealth Management: Trends and Solutions

中国私人财富领域常见法税纠纷的趋势与应对

The Latest Policies in China and Changes in Legal and Tax Requirements for High-Net-Worth Individuals

中国最新政策与高客私人财富法税需求变化

As China's private economy flourishes, the population of high-net-worth individuals in China (HNWIs) is on the rise. Concurrently, the Chinese government has been diligently enhancing the laws and regulations pertinent to private wealth.

随着中国民营经济的不断发展，中国高净值人士（High Net Worth Individuals-HNWIs，下文简称高客）日趋增多，与此同时，中国政府也在不断完善与私人财富（Private Wealth）相关的法律法规。

The updates in policies related to private wealth in China encompass all aspects of wealth creation, preservation, and inheritance for HNWIs. Influenced by special domestic foreign exchange policies and a focus on common prosperity, the scope of legal and tax regulations associated with private wealth extends from wealth creation, preservation, and inheritance to cross-border capital transfer, and charitable planning.

中国私人财富相关政策的更新贯穿高客创富、守富、传富的全维度，而由于国内特殊的外汇管制政策与共同富裕导向，私人财富相关法律税务规则的覆盖从创富、守富、传富延伸到了跨境资金流动与慈善规划领域。

The continual refinement of legal standards demands more sophisticated legal and tax planning from HNWIs. However, many HNWIs have not yet fully grasped these rules or comprehended the associated risks. This lack of understanding leads to significant financial risks and results in litigation and other disputes in four main areas: business operations, taxation, cross-border issues, and marital and inheritance. Consequently, the need to resolve and prevent such disputes has become increasingly urgent for HNWIs.

法律法规的日趋完善对高客的私人财富法税规划提出了更高的要求，然而，大部分高客尚未全面掌握相应规则、亦未充分了解相关风险，导致其在企业经营、税务、跨境、婚姻继承四个方面出现了较多风险并导致诉讼等争议的发生，高客对上述争议的解决与预防需求更加常见与紧迫。

Common Disputes and Development Trends in Private Wealth Management Under the New Regulations

新形势下私人财富领域的常见争议与发展趋势

1. Disputes at the Corporate Level

Effective 1 July 2024, China's revised "Company Law" was enacted. Compared to its predecessor, the new "Company Law" added and amended 228 articles, with 112 substantial revisions and nearly 41 major adjustments. These changes have notably increased the obligations of shareholders and executives, as well as the compliance requirements for corporate operations. As a result, owners of private enterprises in China are now more focused on mitigating legal and personal liability risks. Many have engaged legal teams to perform thorough corporate "check-ups" aimed at averting litigation related to operational compliance, shareholder duties, and the associated penalties

1.企业层面的争议

2024年7月1日，中国的新《公司法》正式生效，相较旧法，新《公司法》新增和修改了228个条文，其中实质性修改112个，有近41处重要调整。本次修法显著增加了股东及高管责任、增加了对企业经营的合规要求，这也使得中国民营企业主更加关注企业的法律风险及个人责任风险的防控，部分企业主聘请了律师团队开展了全方位的企业“体检”工作，以防止公司经营诉讼、股东责任诉讼与相关处罚的出现。

2. Disputes at the Taxation Level

In recent years, the Chinese government has intensified its efforts to refine tax regulations, implementing extensive legislative measures that cover everything from personal income tax and corporate income tax to value-added and consumption taxes. Meanwhile, the government has broadened the scope of its tax collection and management infrastructure. With the ongoing progress of the Golden Tax Project, particularly the implementation of its Fourth Phase, and the strategic deployment of comprehensive and detailed tax management reforms, the level of tax oversight for both businesses and individuals has increased significantly.

2.税务层面的争议

近年来，中国政府加快了对税务规则的完善，从个人所得税、企业所得税到增值税、消费税进行了全面的立法安排。与之相伴，政府也加强了对税收征管能力的建设，随着金税工程的不断推进、金税四期的逐步应用以及全面深入税收征管改革的有效布局，企业及个人面临的税务监管更加严格。

As reported by China's tax authorities, in 2023, tax agencies investigated 135,000 taxpayers for suspected illegal tax activities, recovering a total of 181 billion yuan in assorted tax losses. Since the onset of 2024, several significant tax dispute cases involving corporate and individual tax penalties have arisen. Going forward, tax disputes involving businesses, individuals, and the government are expected to proliferate in the realm of private wealth management, with an increasing number of private wealth lawyers concentrating on tax dispute resolution.

根据中国税务部门公布的信息，2023年税务部门共依法查处涉嫌违法纳税人13.5万户，挽回各类税款损失1810亿元。进入2024年后，国内接连出现了与企业、个人税务处罚相关的大金额税务争议案件。未来，企业、个人及政府间的税务争议将成为私人财富领域的常见争议内容，需求的上升也使得诸多私人财富专业律师将重点放到了税务争议领域。

3. Cross-Border Disputes

China implements a strict foreign exchange control system, requiring that both personal and corporate capital entering or leaving the country meet foreign exchange management requirements. Nevertheless, as high-net-worth Chinese families increasingly seek international education, as Chinese businesses globalize, and as foreign investments in China become more common, the legal transfer of capital across borders has emerged as a crucial necessity in the domain of private wealth.

3.跨境层面的争议

中国实施严格的外汇管理制度，个人、企业的资金出境、入境需要满足外汇管理的要求。然而，随着中国高客家庭教育的国际化、中国企业市场经营的全球化、外国企业投资中国的常见化，合法的资金出入境成为了私人财富领域的重要法律需求。

On the one hand, numerous businesses and individuals resort to unauthorised methods to circumvent China's stringent foreign exchange requirements. As national scrutiny of foreign exchange transactions intensifies, the likelihood of detection and penalisation of these activities grows, consequently boosting the demand for specialised lawyers to manage foreign exchange disputes. On the other hand, to avoid penalties many HNWIs are now engaging professional legal counsel to formulate thorough and lawful strategies for cross-border capital transfer.

一方面，许多企业和个人使用非法的方式“绕过”中国的外汇管制实现资金出入境，随着国家外汇稽查水平的不断提高，上述行为被查处的概率将不断提高，因此，相应主体聘请专业律师应对外汇争议的需求也随之上升。另一方面，为了防止处罚的出现，诸多高客也开始聘请专业律师来制定全面及合法的跨境资金流动方案。

4. Marital and Inheritance Disputes

With the enactment of the "Civil Code" in 2021, numerous novel regulations were introduced, profoundly changing the systems governing marriage and inheritance. China’s marital property regime adheres to a community property system, where most of the assets acquired during marriage are jointly owned by the spouses. Thus, when high-net-worth individuals or their offspring face marital challenges, the division of marital property becomes a central and contentious issue. Additionally, the first generation of HNWIs who rose to prominence following China's economic reforms largely lacks experience in navigating inheritance procedures. This inexperience often leads to contentious disputes over the management of business interests, division of family assets, and the execution of wills after a family member's death.

4.婚姻、继承层面的争议

2021年《民法典》正式生效，其在完善婚姻、继承制度的同时出台了多项新规，并对婚姻、继承领域产生了较大影响。中国的婚姻财产制度以夫妻共同财产制为基础，一旦高客或其子女出现婚变，婚内财产分割就成为了重要的争议话题。此外，中国改革开放后涌现出的首批高净值人士及其家族普遍没有经历过继承程序的磨砺，这导致去世出现的企业控制权争议、家族资产分割争议、遗嘱争议屡见不鲜。

Potential New Legislation and Impact in the Private Wealth Sector

私人财富领域可能出台的最新立法与影响

China's private wealth sector is currently undergoing a significant phase of systematic development. Observations of market trends suggest that new regulations could be introduced in three key areas, potentially affecting high-net-worth individuals'; strategies for tax planning, asset protection, trust design, and the resolution of related disputes.

中国的私人财富领域正处于全面的制度建设期，结合市场观察与热点趋势，国家可能在以下三个领域出台新规，相应规则或将对高客的税务规划、资产保护、信托设计需求及相关争议的解决产生深远影响。

Firstly, in the realm of taxation, the government is actively pursuing the development of a tax framework tailored to China's unique needs. Among these initiatives, reforms in personal income tax regulation, studies on inheritance and gift taxes, and advancements in property tax policy are particularly salient within the private wealth sector. These potential changes are likely to complicate the tax landscape for HNWIs, potentially leading to an increase in tax-related disputes.

首先，在税务方面，国家正在实践中探索制定符合中国特色发展需求的税收体系。在诸多探索中，个人所得税改革、遗产税赠与税研究、房产税的进展均是私人财富领域较为热门的税务话题，也是与私人财富领域最为密切的潜在变化。税改的变化将使得高净值人士所处的税收环境更加复杂，与税务相关的争议或将增多。

Additionally, regarding asset protection, China is diligently refining its civil execution system and officially unveiled the draft of the "Civil Compulsory Execution Law" on 24 June 2022. For one thing, HNWIs who are creditors might experience a surge in litigation and enforcement requirements. In addition, those facing debt risks should critically assess the effectiveness of their asset protection strategies to avoid future disputes.

此外，在资产保护层面，中国正在全面研究完善民事执行制度，并已于2022年6月24日将《民事强制执行法》草案正式公布。一方面，拥有债权的高客，其诉讼与执行需求或将增加，另一方面，存在债务风险的高客也更加需要审视自己资产保护方案的有效性与合理性，防止后续争议的出现。

In the trust sector, the "Trust Law," which has been in effect since 1 October 2001, has not seen a comprehensive revision in over two decades. Yet, the demand for family trust services in China is surging, and disputes are increasingly common, underscoring the need for thorough updates to the legal trust framework. In recent years, the frequency of academic conferences and governmental seminars discussing amendments to trust laws has increased, and the calls for legislative improvements are becoming more vocal. Revising trust regulations will necessitate that domestic family trust plans conform to more complex professional standards, thus elevating the importance of trust attorneys.

在信托层面，2001年10月1日正式生效的《信托法》已有20余年未经历全面的修订，而中国的家族信托业务需求正在蓬勃发展，与之相关的争议也层出不穷，信托法律制度的全面修订与补充愈发重要。近年来，中国境内有关信托法律修改的学术会议、政府研讨也日渐增多，修法呼声日增。信托规则的完善将意味着设计境内家族信托时需要遵守更加复杂的专业规则，信托律师的作用也将因此更为明显。

Challenges and Solutions for Clients—From Dispute Resolution to Dispute Prevention

四、客户面临的困难及解决方式——从应对争议到预防争议

As legal frameworks evolve and regulatory standards increase, HNWIs in China must consistently update their understanding of policy regulations and familiarise themselves with the common disputes related to business operations, tax governance, marriage, inheritance, and capital transfer.

随着法律法规的不断完善与监管水平的持续提升，中国高客需要不断熟悉企业经营、税务治理、婚姻与继承、资金流动四个层面的政策规则和常见纠纷。

Historically, the legal needs of high-net-worth individuals concerning private wealth have typically emerged post-dispute, such as in cases of divorce litigation, tax disputes, or foreign exchange policy violations, at which point professional attorneys were engaged to resolve these issues. Moving forward, it is imperative for HNWIs to prioritize learning the rules and preventing disputes. Prior to the emergence of disputes, they should consult with legal experts to minimise potential risks. By engaging in comprehensive legal, tax, cross-border capital transfer, and succession planning, they can identify and mitigate risks, effectively preempting the occurrence of private wealth management complications.

在过去的几年里，高客的私人财富法律需求普遍产生在争议出现后，比如出现了离婚诉讼、税务争议、外汇处罚再聘请专业律师解决相关问题。未来，高客应当更多地重视规则的学习与争议的预防，在争议未发生时寻找律师来规避相应风险，通过法律、税务、跨境、传承的全方位规划，梳理并防范风险，在前端控制私人财富“事故”的发生。