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Chinese billionaires including NetEase Inc. founder William Ding and Xiaomi Corp. Chairman Lei Jun are among eight of the world's 500 richest people who could be caught by Beijing's crackdown on offshore trusts, which has already brought in more than 160 billion yuan ($24 billion) in back taxes.
Most of that money came in October. Tax authorities collected more than 120 billion yuan last month, and the rest of the declared sum is still being paid. The inflow drove a jump of almost 90% in China's personal income tax revenue for October, and the official Xinhua news agency said "most taxpayers cooperated proactively."
Wealthy Chinese had until late October to declare and pay tax on income from their overseas trusts without extra charges. A uniform 20% rate applies.
Who could be affected
Eight Chinese billionaires on the Bloomberg Billionaires Index hold assets through trusts in places such as the British Virgin Islands and the Cayman Islands and may be affected by the new rules. Their combined fortunes were about $140.2 billion in mid-October.
The richest of them is Ding, the founder and chief executive of online gaming company NetEase, with about $37 billion. Colin Huang, who founded e-commerce group PDD Holdings Inc., the owner of Pinduoduo and Temu, has about $29 billion. Lei, the chairman of smartphone and electric-car maker Xiaomi, has about $20.7 billion.
The others are Zhong Huijuan, founder and chairwoman of Hansoh Pharmaceutical Group Co., with about $15.8 billion; Zhang Bo and his family, who control aluminum producer China Hongqiao Group Ltd., with about $15.4 billion; Pop Mart International Group Ltd. Chairman Wang Ning, whose shares are worth about $10.2 billion; SITC International Holdings Co. shareholder Yang Shaopeng; and Anta Sports Products Ltd. Chairman Ding Shizhong, whose shares are worth about $5.2 billion.
A spokesperson for China Hongqiao said linking Zhang and the company's management to the tax change was "unfounded and misleading."
A loophole closed
China said in July that it would formally tax offshore trusts set up by its citizens, ending an arrangement that business families had used for decades to protect assets and pass wealth to the next generation. Many of the country's richest entrepreneurs placed their shares in such trusts before taking their companies public in Hong Kong or New York.
Advisers say the rules hit long-established trusts hardest, because years of accumulated income can now fall within the tax net. Some families are considering simplifying their offshore arrangements, restructuring them or winding up certain structures altogether, according to Kylie Luo, a practice leader at BDO in Singapore.
The campaign is the most aggressive tax enforcement effort aimed at China's wealthiest people in decades. It also puts pressure on Hong Kong, which has built a large private wealth business serving mainland families and their trusts.
Figures were converted at 6.67 yuan to the dollar.
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