Some of the wealthiest people in China have transferred wealth to shield it from harsher tax rules by the country, a report says.

High net worth individuals in China are rushing to shield their wealth from stricter tax laws in the Asian country, as seen by how four Chinese business leaders shifted more than $17 billion of their wealth into family trusts late last year, a news report said.

New Chinese rules mean that owners of offshore companies will not only pay taxes on dividends they receive, but they will also face levies of as much as 20 per cent on corporate profits, rising from as low as zero under previous rules.

Bloomberg cited examples of billionaire Sun Hongbin, chairman of real-estate developer Sunac China Holdings, who disclosed in a filing in Hong Kong on 12 January that he had moved most of his stake in the company to South Dakota Trust Co on 31 December. Longfor Group Holdings chairwoman, Wu Yajun, reportedly made a similar move in recent weeks, as did the leaders of food distributors Dali Foods Group and Zhou Hei Ya International Holdings, the newswire said.

The report went on to say that three of the four Hong Kong-listed companies cited succession planning as the reason for transferring the money. The ownership structures of all four tycoons involve entities in the British Virgin Islands. Representatives at the firms did not immediately respond to requests for comment, the report said.

China, which is seeking to curb capital outflows amid decelerating growth, wants to bolster state revenues by targeting wealthy individuals, making it politically more palatable to eventually raise money from the wider population. There is an estimated $24 trillion of private wealth in China, Bloomberg has reported. 

As noted a few weeks ago, Bank of Singapore, for example, logged a 35 per cent jump in Chinese clients interested in offshore trusts from the second half of 2018. Reforms are meant to extract more money from high earners and holders of wealth. The country has also launched a crackdown on tax evaders, and sought to stifle outflows of capital. Simultaneously, Chinese HNW individuals have been among the most eager applicants for “golden visa” residency/citizenship programmes operated around the world.