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PRC starts taxing overseas income

China has started tracking down some of its citizens living abroad to collect taxes, surprising expatriates who never had to pay levies back home on overseas income, people familiar with the matter said.

State-owned enterprises operating in Hong Kong, which has one of the lowest tax rates in the world, have told Chinese expats to declare their income for last year so that they can pay taxes at home, said the people, who asked not be named because they are not authorized to speak publicly on the matter.

Chinese state-owned enterprises are also informing employees working in other nations, such as Singapore, two of the people said.

China, which charges taxes of as high as 45 percent, revised its income tax rules in January last year to help authorities start collecting money from its citizens worldwide — similar to what the US does with Americans living abroad, but Beijing only disclosed detailed instructions this year on how to file such taxes, catching many expatriates flat-footed.

The move signals the beginning of what could be a major shakeup for one of the largest expat communities in the world, as some could see their tax bills soar.

Though specific statistics on expats were not immediately available, Chinese state media have reported that there are about 60 million Chinese living overseas.

There are about 80,000 to 150,000 Chinese working in Hong Kong, the South China Morning Post said, which earlier reported on the taxation issue.

Chinese working in Macau have also been told to start paying income taxes back home, the Nikkei Asian Review reported.

The Chinese State Taxation Administration did not immediately respond to a fax seeking comment.

The move could be a big blow for Chinese expats working in places such as Hong Kong, who have only had to pay a maximum of 15 percent of their salaries in taxes. That is one-third of China’s highest tax bracket.

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