Chinese tax residents are required under existing law to pay individual income tax on their worldwide income, including taxable returns from overseas insurance products. This clarification from the State Taxation Administration (STA) comes amid market discussion surrounding insurance policies purchased in Hong Kong.
A report by the China Daily says the authority stressed that the requirement was neither a new policy nor a measure specifically targeting the Hong Kong insurance market.
An STA official said China’s Individual Income Tax Law requires Chinese tax residents to declare and pay tax on applicable income earned both domestically and overseas, including returns from offshore insurance products. The official said taxing residents on foreign income, including insurance payouts, is a common international practice and has been a fundamental principle of China’s individual income tax system since the law took effect.
The clarification followed market debate over the taxation of offshore insurance policies and reports that tax authorities were stepping up cross-border tax compliance. The STA said tax authorities had conducted policy briefings and issued compliance reminders in recent years in line with existing laws and regulations.
The authority added that overseas income covers multiple taxable categories and that the taxation rules are not directed solely at the insurance industry. Chinese tax residents are treated equally under the law regardless of whether overseas income is derived from insurance products, other investments or another country or region, with taxable income required to be declared and taxed in accordance with the law.