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High-Tax Country Resident Planning To Go Offshore:
China
If
you are resident and domiciled in China
(which will be the normal situation for
a native-born Chinese individual) then
you are taxable on your world-wide income.
Many
resident individuals will be participating
in domestic Chinese tax-privileged savings
and investment instruments, and usually
these can simply be discontinued on leaving
without serious tax penalties.
Domicile
is established as a result of habitual
residence and/or family or economic involvements
in China. Individuals with Chinese domicile,
and those who have lived there for more
than five years, pay tax on their world-wide
income. In
order to lose tax residence it is necessary
to stop fulfilling residence criteria
in a given tax year.
For
an individual who knows she is going to
leave China, there is a case for switching
income-generating assets into capital
appreciation assets in a country outside
China. Gains which crystallise after residence
has finished will escape Chinese tax.
Once
Chinese residence has been terminated,
and if non-residence is expected to be
permanent, then an ex-Chinese resident
is free to invest offshore in order to
obtain the best possible returns.
Once
a definite decision to move offshore has
been made, careful thought should also
be given to existing Chinese capital assets,
including pension assets. Will it be possible
to move them offshore without incurring
a tax liability? Is it desirable to move
them early and pay the tax anyway? These
are complex questions, and the answer
will depend on individual circumstances,
but for many individuals there will be
interesting tax planning possibilities.
www.lowtax.net
contains extensive information on the
investment, tax and legal regimes in 50
of the main offshore jurisdictions. Further
information is available in our Investment
Information Providers Section, and
the four main types of offshore investment
are described in the Guide
to Offshore Investment on this site.
NB: The suggestions given above do not
constitute investment advice. They are intended
only to assist individuals in finding appropriate
professional advice, which is essential
for anyone planning offshore investment.
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Lowtax Network Portal