China's tax authorities have stepped up efforts to trace overseas assets, and there are reports that some wealthy Chinese have transferred funds from Hong Kong and Singapore to the United States. (AFP file photo)
Beijing expands its pursuit of overseas assets, and Chinese wealthy people actually transfer money to American banks! Foreign media revealed that as the Chinese government strengthens tax supervision of offshore trusts, private banks and lawyers in Hong Kong and Singapore have recently received more inquiries from Chinese clients, hoping to transfer assets originally stored in Asian financial centers to the United States to reduce the risk of financial information being mastered by Beijing.
CNBC reported that businesses that help Chinese clients manage overseas assets said that since the Chinese government announced in July this year that it would impose a 20% personal income tax on income and gains from qualified offshore trusts, inquiries from clients about transferring assets have increased significantly. Some wealthy people began to transfer funds originally stored in Singapore or Hong Kong to the United States, and some customers completed account opening in less than two months.
Keith Tan, CEO of Golden Acacia Capital in Singapore, said that this kind of situation is quite common. Customers with larger assets usually choose large private banks, while customers with smaller funds may turn to regional banks or online brokers.
The key to the United States becoming a new choice for some Chinese wealthy people lies in the financial account information exchange system. The Common Reporting Standard (CRS) promoted by the Organization for Economic Co-operation and Development (OECD) allows more than 100 participating jurisdictions to automatically exchange financial account information. Hong Kong and Singapore participate in this system, but the United States is not. Therefore, U.S. banks are not obliged to automatically report Chinese customer account information to Beijing through the CRS.
The report said that some banks in New York are actively accepting this wave of demand and assisting Chinese customers in planning asset allocation. A wealth planning consultant serving Chinese family offices revealed that after the increase in inquiries, some banks even shortened the period for customers to reach the minimum asset threshold to cope with the demand for account opening.
There are family tax planning considerations behind the transfer of assets by wealthy Chinese people to the United States. Chen Junjie pointed out that some Chinese families whose children hold U.S. green cards also use "Foreign Grantor Trust" to arrange assets. This type of trust is generally considered to be held by a non-U.S. citizen under the U.S. tax system, which may help reduce some of the U.S. tax liability. He also said that low-tax states such as Nevada and Florida have become popular places for some families to choose trust arrangements.
However, transferring assets to the United States does not mean it is foolproof. Clifford Ng, a partner at Zhong Lun Law Firm in Hong Kong, reminded that assets originally stored in Hong Kong or Singapore may have already been declared to Beijing through CRS. If funds are transferred from the original account, the transaction process will still be recorded, and the authorities may not be able to trace it.
Wu Shouwen bluntly said that some people are betting that they will not be exposed, but "concealment does not equal legal tax planning." Cris Cao, a partner at Beijing Weiheng Law Firm, also pointed out that even if all the funds are transferred from the CRS declaration account to a US bank, it will not automatically eliminate the taxation rights of the Chinese tax authorities or the tax payment obligations of the taxpayers; the record of the funds being transferred out may itself become the basis for tax recovery.
In addition, it is becoming increasingly difficult for funds within China to be remitted overseas. Jingkuan Lin, a private banker at the Bank of Singapore, said that it will be almost difficult to remit large amounts of funds within China in the future, and the offshore banking industry may therefore focus more on serving funds already stored abroad.
