China: A Tax (PRC Firms) Overview
China’s New Era of Individual Overseas Income Taxation: Compliance Challenges and Strategic Outlook Under the Common Reporting Standard
With the global trend towards tax information transparency accelerated by the Common Reporting Standard (CRS) exchange and the enhanced enforcement capabilities of the Chinese tax authorities, tax compliance regarding individual overseas income has become an increasingly hot topic and area of concern for high net worth individuals. The Chinese tax authorities’ scrutiny and grip on individuals’ overseas income reporting and compliance is expected to continue in the future.
The New Landscape of Overseas Income Taxation
China’s Individual Income Tax Law establishes a principle of global taxation for Chinese tax residents. Historically, the primary challenge for Chinese tax authorities in enforcement was channels for obtaining an individual’s overseas income information. However, with the evolution and application of the “Golden Tax System Phase IV” and artificial intelligence technologies, together with a matured multilateral information exchange mechanism based on the CRS, Chinese tax authorities now have all the gadgets needed to effectively enforce tax law on individuals’ overseas income and financial assets.
We expect that voluntary tax self-assessment and backfilling for overseas income could become a new norm for Chinese individual taxpayers. With a deeper level of information exchange between tax, banking and foreign exchange administrations, data obtained by tax authorities would be more accurate and granular. Furthermore, the enforcement standards across different local tax bureaus are expected to become more consistent, which will reduce room for tax avoidance.
The Distinctive CRS Self-Assessment and Backfilling Tax Procedures
The tax self-assessment and back filling procedures differ from a regular tax audit, as they emphasise the taxpayer’s proactive co-operation and present challenges with respect to communication with tax authorities.
On the one hand, information on overseas accounts exchanged under the CRS primarily includes total annual income and year-end balance of financial accounts, without details on individual transactions. This can lead tax authorities to overestimate the global income tax liabilities for taxpayers due to a lack of information on the costs and expenses associated with overseas income or assets. Taxpayers facing enquiries from tax authorities need to plow through piles of bank statements and other evidence to look for relevant costs, expenses and other deductible items during their tax filings, which could be a daunting task – especially if the taxpayer has multiple accounts and years under assessment.
On the other hand, to claim any tax deductions, taxpayers bear the burden of proof, which includes submitting supporting documents such as bank slips, potentially revealing additional information to the tax authorities. At this stage, tax authorities typically would not issue a written tax notice specifying the tax underpayment amount. Taxpayers are ultimately responsible for the accuracy of their tax filings and payments.
In the self-assessment procedure, we recommend that taxpayers proactively check evidence for deductible items with assistance from tax advisers and engage with the tax authorities. Ignoring requests from tax authorities or refusal to comply could lead to a formal tax audit, additional late interests, tax penalties and even criminal liabilities.
Re-Evaluation of Traditional Financial Tools
Under the CRS reporting mechanism, tax transparency of overseas structures and financial assets such as trusts and insurance policies has significantly increased,reducing their perception as “tax evasion tools”. However, a well-structured trust or insurance policy still provides considerable benefits in terms of tax deferral. For instance, a well-drafted trust deed, comprehensive distribution resolutions and accurate financial records can serve as critical evidence regarding asset ownership, nature of income and when tax obligation should arise, which would be beneficial in claiming income tax deferral and lowering tax risks.
Nonetheless, if a trust is considered to be constructed for “tax avoidance purposes”, tax authorities can examine the trust’s income information through the CRS, which may result in the disregarding of the trust’s tax benefits, leading to the trust’s entire income being subject to income tax.
Individual Response and Planning: Proactive Compliance
In an increasingly transparent tax environment, the core strategy for high net worth individuals is to be prepared for proactive and systematic compliance management.
For short-term response, the key lies in effectively utilising the self-assessment window period. Upon receiving an enquiry from the tax authorities, individuals should conduct a comprehensive and systematic review of their overseas financial assets and income, accurately calculate the tax payable and promptly make tax payments. This is generally the most cost-effective way to manage tax risks.
For long-term planning, the focus should be on front-loading tax compliance. Tax assessment and evaluation must be deeply integrated at the outset of all significant cross-border transactions, investments and wealth succession decisions, rather than adjusting structures thereafter. This ensures optimisation of structure and control of tax burdens at the source. Additionally, periodic tax health checks – a regular review and assessment of the individual’s global asset layout, shareholding structures and potential tax risks, with professional assistance – are essential for dynamically adjusting strategies in response to changes in law and the enforcement environment, and for achieving sustainable compliance.
Conclusion
China’s enforcement of individual overseas income taxation has entered a phase of substantive, data-driven enforcement. For high net worth individuals, creating a tax compliance system through a proactive, professional and transparent approach is essential for achieving long-term wealth security and succession in this new environment.
中国个人境外收入征管新纪元：CRS下的合规挑战与策略展望
随着共同申报准则（CRS）信息交换推动的全球税务信息透明化，以及中国税务机关征管能力的提升，个人境外收入的税务合规已成为高净值人士日益关注的热点议题。预计未来，中国税务机关对个人境外收入的申报与合规管理将持续强化
境外收入征管新格局
《中华人民共和国个人所得税法》确立了中国税收居民全球收入征收原则。以往税务机关的征管难点在于获取个人的境外收入信息。然而，随着“金税四期”系统与人工智能技术的深度应用，以及基于CRS 的多边信息交换机制日益成熟，中国税务机关已具备对个人境外金融资产及收入实施有效征管能力。
我们预计，从2025年开始，针对境外收入的自查补税将成为一项常态化工作。随着税务机关、银行、外汇管理等部门间的信息协助深化，税务机关获取的数据将更为精准。此外，各地税务机关执法标准也趋于统一，避税空间将被极大压缩。
独特的CRS自查补税程序
境外收入自查补税程序不同于正式的税务稽查，它更强调纳税人的主动配合，对纳税人与税局的沟通提出更大挑战。
一方面，CRS交换的境外账户信息主要涵盖金融账户的年度收入总额和年末余额，不包含每笔交易的具体明细。这可能导致税务机关在缺乏境外收入或资产的成本费用信息时，高估纳税人的全球应税所得金额。纳税人若接到税务机关问询，需要梳理大量银行对账单等凭证，从中寻找可抵扣的成本费用项目。若涉及多个账户和多个年度时，这项任务将极其繁重。另一方面，纳税人若主张税收扣除，则承担举证责任，例如向税务机关提交银行账户明细等支持性材料，这意味着可能向税务机关披露更多信息。税务机关在该阶段通常不会出具书面的税务通知告知纳税人补税金额，纳税人需要为自行申报和补缴税款的准确性承担最终责任。
在自查阶段，我们建议纳税人在税务顾问的协助下，主动核查可抵扣项目的证据，并与税务机关保持沟通。忽视税务机关的要求或拒绝配合可能引发正式的税务稽查，从而产生更多的滞纳金、税务罚款乃至刑事责任。
传统金融工具价值的重新审视
在CRS信息交换机制下，信托、保单等海外架构和金融资产的税收透明度显著提高，其作为“避税工具”的色彩已大大减弱。然而，设计良好的信托及保单安排在税收递延方面仍具有价值。例如，清晰的信托契约、完备的分配决议与财务记录，能够为资产权属、收入性质及纳税时间提供关键证据，有助于申请所得税递延及降低税务风险。
但若一项信托安排被认定主要用于“避税目的”，税务机关可以通过CRS了解其收益状况，可能导致税收层面信托被击穿，进而对其全部收入征税。
个人应对与规划：主动合规管理
面对日益透明的税务环境，高净值人士的策略核心应转向主动系统的合规管理。
短期应对的关键在于有效利用自查窗口期。当接到税务机关问询时，纳税人应全面、系统地梳理境外金融资产与收入，准确计算应纳税额并及时缴纳税款，这通常是控制风险的最低成本途径。
长期规划应侧重于将税务合规前置化。将税务评估深度嵌入所有重大的跨境交易、投资和传承决策之初，而非事后再进行调整，从而在源头上优化结构、控制税负。同时进行定期健康检查，对个人全球资产布局、持有架构及潜在税务风险，在专业人士协助下进行定期审查与评估，根据法律与征管环境的变化动态调整策略，实现合规状态的可持续性。
结语
中国对个人境外收入的征管已进入基于数据驱动的实质执法阶段。对于高净值个人而言，通过主动、专业、透明的态度构建税务合规体系，才能在新环境下实现财富的长期安全与传承。