Wealthy Chinese Rushing to Establish Overseas Trusts
Consultants, private bankers and lawyers are seeing more business from PRC clients as they seek to shelter assets and income in overseas trusts ahead of new tax laws, which will be introduced in January.
China’s tax law reforms that target high net worth individuals, set to come into force on 1 January 2019, are causing wealthy Chinese to scramble to establish overseas trusts to shelter their assets and income, «Bloomberg» reported.
Since the second half of 2018, there has been a 35 percent growth in the number of enquiries from Chinese clients interested in establishing offshore trusts, Bank of Singapore said, «Bloomberg» reported.
According to Boston Consulting Group, overseas holdings of Chinese will reach $1 trillion in 2018.
Placing one’s wealth in a offshore trust, which is under the ownership of a third-party trustee, limits the ability of clients (known as settlors) to make decisions on their wealth, but reduces their tax liability and adds a layer of protection against third-party claims.
Pressure on Tax Evasion
The country’s new tax rules favour the lower and middle-income population by widening the lower income brackets and increasing the tax burden on the rich, including foreigners and Chinese with overseas wealth.
China has strengthened controls on taking money out of the country and has recently doubled down on tax dodgers and wealthy citizens that conceal their income.
In October, film and TV star Fan Bingbing and her associated companies were ordered to pay $129 million in taxes and penalties, following a high-profile crackdown that saw the actress publicly apologising on her Weibo social media account.