In the light of a major tax reform with respect to private income enacted by the Chinese government for fiscal year 2019, BearingPoint has started the development of a client tax reporting for China. This new report aims to facilitate the declaration of worldwide assets by wealthy Chinese nationals with assets in offshore centers such as Hong Kong, Singapore, or Switzerland.

As of end of May 2019, BearingPoint has drafted an initial version of the tax concept together with the Beijing office of its Big 4 tax advisory partner. A ready-to-use version of the report will be available for the upcoming reporting period in March 2020, which will be the first time when China’s individual income-tax reform impacts the tax filing.

As usual with EasyTax modules, the client tax reporting for China will include all relevant information on investment portfolios that a bank client requires to file his or her tax declaration correctly. The complexity of Chinese tax rules lies in the different treatment of income coming from domestic and foreign sources. Income received from Chinese entities, or securities traded on the mainland stock exchanges Shanghai and Shenzhen, may not be subject to taxation under certain circumstances. Meanwhile, income from foreign sources may benefit from tax credits if declared appropriately. Furthermore, the income-tax reform will have a considerable impact on the relevant tax forms, which have not yet been published. BearingPoint will stay in close contact with its tax advisor to include the latest regulations in its module on an ongoing basis.

It is not so surprising that a recent study conducted by Asian Private Banker has identified China as the jurisdiction in top demand for a client tax reporting by Asian financial institutions. According to the study, 66% of banks report that they plan to increase investment in tax reporting solutions over the next 12 months.

The client tax reporting for China will be an add-on module based on BearingPoint’s standard reporting platform EasyTax. Twenty-five countries are already covered, with additional modules for Russia, India, and Japan in the pipeline for 2020.

Over the past two years, the focus of new EasyTax modules has shifted considerably to Asia/Pacific countries, where local tax amnesties, US FATCA agreements and the OECD Automatic Exchange of Information (AEOI) increasingly require tax transparency. The client tax reporting for China will be a welcome offering to bank clients who wish to be prepared for the Chinese tax administration’s requirements based on AEOI data, which they have received from offshore hubs such as Hong Kong or Singapore for the first time in autumn 2018.

Ronald Frey, Chief Product Officer RegTech, BearingPoint

 

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