China’s rich tremble at taxes, exit bans

Mark O'Neill August 31, 2026 12:28

Mainlander Mr Lin used to work in Hong Kong where opened an account with a stockbroker. He moved back home but continued to trade with HK$1 million in the stock market, collecting dividends and interest.

“Last summer out of the blue I received a telephone call from someone who knew all my personal information and told me to pay a 20 per cent tax on my Hong Kong earnings. I thought it was a scam until my friends were summoned to the city government to pay the tax. Fearful, I paid too.”

Lin is one of thousands of Chinese who hold assets outside the mainland. On July 24, the Ministry of Finance and State Tax Administration (STA) ordered them to pay 20 per cent in income tax on assets placed in offshore trusts and the income they generate. It covers shares, property or other assets transferred into such trusts.

Mr Chen runs a large construction materials business in a large mainland city. He has invested HK$50 million in funds, insurance and shares in Hong Kong.

He recently went to withdraw money from his HK account but was told that it was frozen. He had to pay HK$5 million in taxes before gaining access to his money. He did so.

The order states that those affected must pay taxes within 90 days to avoid penalties for late payment.

Under the Common Reporting Standard, a global system created by the OECD, banks are required to provide data on financial accounts between countries to stop tax evasion.

What is frightening the wealthy even more is an order issued by the State Council on July 31 that allows border officials to prevent people leaving the country under certain conditions.

“If they violate export controls or technology import and export rules in a way that may endanger industrial or technological security. Citizens who committed illegal or criminal acts abroad that harmed national security or interests may face an exit ban of six months to three years,” the order said.

Reports on Youtube describe such cases in August, People reach the airline counter with a valid ticket and luggage ready to put on the plane. They are told they cannot leave, often without explanation for the reason and without being told which government department issued the order. Non-payment of tax is one reason.

The government has ordered Chinese banks and other financial institutions to review overseas investments by wealthy Chinese to check if income has been declared to the STA. These include offshore trusts and gains made from purchases of real estate, equities, precious metals and cryptocurrencies. The offshore trusts have been a very popular method to hide assets abroad. The tax has shocked those who hold them.

In some cases, the investigations go back 10 or 20 years.

Chinese banks have been instructed to freeze accounts until the STA is satisfied that taxes on capital gains had been paid. One banker said that most people pay the fines and taxes immediately to regain access to their accounts.

Mindful of earlier Communist campaigns against the wealthy and their assets, the rich diversify risk by investing outside the mainland. Hong Kong is the preferred destination because of the convenience and density of financial institutions who can help them manage their money.

Abroad, they buy property, usually in cities with a sizeable Chinese population, like Vancouver, Toronto, New York, Houston, Los Angeles and other cities in California, Brisbane, Sydney and Melbourne.

Often they put the ownership of the properties in the name of family members or companies in the Virgin or Cayman islands that they control.

They acquire foreign passports through residence. Many countries also offer a residence card or passport in exchange for buying property above a certain value or depositing money in a state-designated account for a fixed period.

But, the Ministry of Finance warned, those who become foreign citizens or overseas permanent residents but keep their main economic interests in China may still be treated as Chinese tax residents.

What is driving this pursuit of offshore assets is a drop in national tax revenue. In January, the Ministry of Finance said that China's fiscal revenue fell 1.7 per cent in 2025 from a year earlier, the first contraction since 2020 due to a protracted property slump and weak domestic demand. Fiscal revenues in 2025 totalled 21.6 trillion yuan, the ministry said. Expenditures grew 1 per cent to 28.7 trillion yuan, slowing from 3.6 per cent growth in 2024.

Mark O'Neill

A Hong Kong-based writer, teacher and speaker.