In response to recent market speculation regarding a potential 20% personal income tax on offshore policy gains, the Hong Kong Federation of Insurance (HKFI) issued a statement on Wednesday (August 7).

The HKFI clarified that no official policy document or implementation guidelines have been released by relevant authorities to date. The federation is actively monitoring and understanding ongoing developments, and as such, it refrains from speculation or commentary on the current discussions and rumors.

In its response, the HKFI emphasized that client demand for protection, wealth succession, and asset allocation is expected to remain strong. As an international financial hub, Hong Kong's insurance products offer advantages including flexible product design, multi-currency allocation, comprehensive wealth succession planning, and professional service standards. The HKFI believes that, for clients with such needs, the overall Hong Kong insurance market remains attractive and competitive.

Reports have surfaced that tax authorities in cities like Beijing and Hangzhou are applying a 20% personal income tax rate on gains from offshore policies, particularly those from Hong Kong, including dividends and prepaid premium interest. This 20% rate is not new but aligns with existing tax categories such as "interest, dividends, and bonuses." Previously, opaque cross-border information made it challenging to enforce taxes on offshore policy gains. However, with the maturation of the Common Reporting Standard (CRS), the Chinese mainland can now exchange data on cash-value policies through jurisdictions like Hong Kong, narrowing the gap in enforcement.

Under China's individual income tax law, resident taxpayers are required to report and pay taxes on their global income. The Hong Kong Insurance Authority also noted that the obligation for Chinese residents to declare and pay taxes on offshore investment gains has always been in place, suggesting the market should not overreact to these developments.