Beijing’s offshore insurance tax tests Hong Kong wealth management

Financial markets have been gripped by concern in recent days over reports that China was introducing a new tax on returns from offshore insurance policies. The significance of the episode could prove more complex than the initial market reaction suggests.According to a report from Caixin, Chinese tax authorities have sought to collect tax on investment returns generated by offshore insurance policies held by mainland residents, with early enforcement cases reportedly emerging in Beijing and Hangzhou. The report unsettled financial markets, sending shares of Prudential, HSBC, AIA and other firms lower as investors reassessed businesses exposed to mainland demand.According to China’s State Taxation Administration, the 20 per cent tax rate on relevant insurance investment income is not new and does not specifically target Hong Kong. The authority also urged the market not to overreact, seeking to correct the impression that China had launched a sweeping crackdown on Hong Kong insurance.