China moves toward US-style global taxation of wealthy citizens

Beijing’s recent move to tax the offshore wealth of its citizens may be just the initial phase of a broader campaign to extract income from the estates of China’s wealthy families, analysts say.

Yingke Zhou, a director at Barclays, sees the recent push to tax Chinese offshore assets as “potentially the first steps” toward stricter oversight of cross-border wealth, as Beijing works to ease fiscal strains and replenish capital to fund strategic tech industries.

“Policymakers could consider expanding scrutiny to areas such as exporters’ income held abroad and overseas investments. [and] labor income and, in the longer term, wealth or inheritance taxes,” Zhou said in a recent report.

Unlike the United States, the United Kingdom, Japan and major European economies, China imposes no property, inheritance or gift taxes, and derives a comparatively small proportion of revenue from personal income, capital and wealth-related taxes, according to Bank of America Research.

BofA analysts see a similar path, saying the richest households face “interest income, wages and foreign property gains potentially next in scope” for higher taxes.

Zhou hopes authorities will widen the tax net to capture returns from overseas real estate, stocks, fixed income and precious metals. Such a change would bring China’s practices closer to those of other major economies, he said.

Hong Kong and Singapore have been the preferred havens for wealthy Chinese relocating their fortunes, and the former has created a major trust industry dependent on the mainland’s wealth.

Ryan Lin, principal at Singapore-based Bayfront Law, said cross-border Chinese clients should “absolutely prepare for permanent structural adjustment as Beijing moves from passive oversight to a global tax model similar to the US regime.”

Lin hopes the application will eventually extend to an exit tax on unrealized capital gains for those who emigrate, and to rules that would function as a de facto tax on inheritances and gifts.

Beijing’s offshore tax campaign has advanced rapidly this year.

Since May, Hong Kong banks and brokerages have taken steps to comply with a Beijing-led crackdown on cross-border trading, restricting mainland clients from investing in foreign stocks. In July, China imposed a 20% income tax on offshore trusts, closing a long-standing loophole used by wealthy families for asset protection and estate planning.

Chinese authorities reportedly began imposing taxes on income and wages from insurance policies that Chinese citizens earned abroad. More recently, regulators established a 20% tax to be paid by foreigners on dividends earned from foreign-funded companies, which previously did not exist at all.

“The sudden measures indicate some urgency,” said a Hong Kong-based lawyer who asked not to be identified because of the sensitivity of the matter.

These new measures signal broader tax reforms as authorities look for diversified sources of revenue, while the real estate crisis chokes off land sales that once financed local governments. Beijing also faces a growing need for capital to finance its strategic sectors.

Government revenue fell to around 20% of its GDP in 2025, down from 26% in 2021, according to Barclays estimates. Spending remained high, declining only modestly to 29% of GDP in 2025, from 31% in 2021.

“Chinese local governments are facing a fiscal crisis and need new sources of revenue,” said Kyle Chan, senior fellow at the Brookings Institution.

Capital has also been flowing out faster than at any other time on record. Net outflows reached nearly $780 billion in 2025, surpassing the 2015 peak of around $630 billion, according to Zhou, as residents accumulated overseas assets and overseas investments increased. In that context, offshore trusts and insurance policies represent “a considerable pool of wealth that has historically faced limited tax clarity and enforcement,” he said.

More than half of China’s super-rich people use offshore family trusts to manage their wealth, a KPMG report showed, translating into hundreds of billions of dollars in assets.

Stricter enforcement also supports Beijing’s effort to keep investment capital within China and deepen domestic capital markets as a source of financing for technological innovation, said Dan Wang, China director at Eurasia Group.

China’s tax burden remains low by international standards, with a tax-to-GDP ratio of 19.5% in 2024, versus the OECD average of 34%, according to BofA, a gap that supports Beijing’s drive to collect more direct taxes and strengthen revenue.

The recent measures are sending a signal to China’s wealthiest residents that they should “keep their money inside mainland China,” Brooking’s Chan said. “Actions that were once overlooked are now treated more seriously.”