NPC deputy proposes 'expatriation' tax on migrating wealthy

Chen Huizhi
Tax evasion by the wealthy who have transferred residency from the country can be better curbed with an expatriation tax, an NPC deputy from Shanghai has proposed.
Chen Huizhi

Some rich Chinese people who have moved out of China are evading their tax obligations to the country while continuing to make money at home, according to Chen Jingying, a deputy to the 13th National People's Congress from Shanghai.

She was speaking during the fifth session of the ongoing annual Two Sessions being held in Beijing and cited loopholes in tax regulations for this group of people.

Chen is a member of the central committee of the Chinese Peasants and Workers Democratic Party, a non-Communist party in China, and a counselor of the Shanghai government. She was formerly vice president of East China University of Political Science and Law.

"The latest revision of the Individual Income Tax Law of China from 2018 stipulates tax settlement for taxpayers who plan to terminate their permanent residency in China after moving overseas, but there's no taxation on deemed sales of their property in China, nor extended taxation beyond their expatriation," she said.

"As a result, some rich people easily manage to evade taxes by renouncing their nationality and transfer their assets overseas."

Chen proposed amendments to the Individual Income Tax Law and the Enterprise Income Tax Law of China, drawing on legal practices in some countries such as the United States and Germany.

Individuals who relinquish their Chinese citizenship should be treated as having sold all of their property at fair market value prior to that, including real estate property, stocks, equity shares, bonds and certain personal objects such as automobiles, and the net gain, if any, on the deemed sale of the property should be subject to conditional taxation, she said.

According to the current law on individual income tax, individuals who evade tax obligations in China with business maneuvers from overseas could be subject to different taxation rules than otherwise applied to personal income acquired from overseas.

Chen suggested that such individuals be held liable for tax on income from all non-foreign sources for 10 years after emigration if they are identified to have substantial economic relations to China for five years within the 10 years prior to their renouncement of Chinese nationality.

She also proposed stricter tax rules for companies that relinquish their corporate nationality.

Premier Li Keqiang said in the government work report at the opening of the NPC session on Saturday that the government will further improve the taxation system and crack down on tax evasion and fraud.

Special Reports