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People's Daily Online>>China Society

Taxing immigration

By Zou Le (Global Times)

09:14, January 06, 2012

Yan Rong, a wealthy businesswoman who has been contemplating possible immigration to the US, is second guessing her plan after learning that she would have to report her assets in China to the US government should her application be accepted.

"The US has a very sophisticated tax system, you can't expect to exploit loopholes there like you do in China," Yan told the Global Times.

The 35-year-old Shanghai native, who owns several private schools and a big stake in an electronic company, was referring to the Foreign Account Tax Compliance Act, which was enacted in 2010 and requires US citizens report their foreign financial assets.

Late last month, the Internal Revenue Service (IRS) released details on the Act, which observers say might put a dent in Chinese nationals' enthusiasm to emigrate to the US, particularly for China's nouveau riche who have become the largest group of people emigrating to the country through investments last year.

Plans dropped

According to the act, individuals must file Form 8938 to report their interests and specified foreign financial assets by April if the total value of those assets exceeds an applicable threshold amount.

The reporting threshold varies depending on whether an individual lives in the US is married, or files a joint income tax return with their spouse. For example, a US citizen or a green card holder living in China needs to file the Form 8938 and report his or her foreign financial assets if their total value exceeds $200,000.

Failing to file the Form could result in a $10,000 fine, with an additional penalty of up to $50,000 for continued failure to file after IRS notification.

The IRS Beijing office said no figures are available at the moment as to how many US citizens have reported their assets located within China.

"I would not rule out the possibility that some wealthy Chinese will drop their immigration plans because of this," said Li Jiang, a senior immigration consultant with Can-Reach Pacific, a leading immigration agency in Beijing.

"The reporting threshold is not very high so many middle-class Chinese would be subject to the new Act, let alone business tycoons. Also, many people who migrate still spend most of their time running their business in China," Li said to the Global Times.

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