Modern Chinese Immigration
As we know, China is the second largest economy of the world and Hurun Report (2015) further shows that it’s the first time the number of billionaire in China is more than the one in the US. Chinese now are actively seeking for transformation and globalization particularly through oversea migration.
In the immigration market, China lately moved up its ranking as the 4th largest exporter of immigrants from the 7th position. European countries (except UK) are increasingly prevalent for their low threshold of investment. However US remains as the number one choice especially via EB-5 immigration program, despite the fact that US is imposed a stringent tax law FATCA where all tax residents are required to report their worldwide assets and incomes to the US tax bureau. Foreign financial institutions need to reveal account details of US and US tied investors, based on an IGA (Inter Government Agreement) with US.
Donglin Family Office, who is dedicated to high net worth Chinese in Greater China, recognizes that top reasons for immigration are to seek for better education and opportunity of their children, this is because 80% of the world’s best schools are situated in US. Purpose of immigration nowadays could go beyond these, for some finding a tax haven is a higher priority. Citizenship change and financially acquiring passports become a common tool in achieving this. It’s evidenced by events such as Chinese were fighting for immigration to Hong Kong for the sake of low-tax benefit before Hong Kong government suspended applications. Malta and Antigua are popular with citizenship buying. To some extent, Chinese also learn to catch up the burgeoning trend setting up companies and trusts offshore, particularly in tax-privileged jurisdictions like BVI and Cayman Island to gain local tax benefits.
In the light of globalization sentiment, previous G20 meeting held by OECD in 2013, had rallied for tax transparency and BEPS (Base Erosion and Profit Shifting) actions among participating members. To effectively facilitate the realization, more agreements such as CRS (Common Reporting Standard) are in place to support and reinforce individual’s financial information exchange between countries. Last year China joined MCAA (Multilateral Competent Authority Agreement) and agreed to implement it officially from the September of 2017 and 2018 with different stage of compliance required. By doing so, global tax transparency could be achieved. Wealthy individuals and international organizations no longer can abuse the tax difference between borders and countries, but are forced to conform to international binding.
As a hosting country of G20 in 2016, it could offer a great opportunity for China to emerge from a rule-follower into a dominate player, having more impact in the future. With upcoming requirements in tax reporting and individual information exchange, more planning and matters should be taken into consideration to meet the purpose of immigration prior to proceeding. As a founding member of IMC, Donglin Family Office, aims to provide custom-made solutions and service to handle potential changes and challenges imbedded in the immigration process and family succession.
Author: Victor Ai, Co-Chairman, Donglin Family Office (HK)