I. The Growing Impact of CRS and Taxpayers’ Concerns

In late 2024, several ultra-high-net-worth individuals in China holding offshore assets exceeding 10 million US dollars received interview notices from tax authorities.

On March 25 and 26, 2025, tax authorities in Hubei, Shandong, Shanghai and Zhejiang issued public announcements. Four resident individuals were found to have failed to declare and pay taxes on their overseas income, with the maximum tax supplement reaching 1.413 million yuan.

Since April 2025, a number of domestic residents who hold securities trading accounts with Hong Kong brokerages have successively received risk alerts from local tax authorities, requiring them to conduct self-inspections and make supplementary tax payments. Many of these individuals hold overseas accounts with funds below 1 million US dollars.

On November 11, 2025, tax authorities in Beijing, Guangdong, Fujian, Sichuan, Shenzhen and Xiamen released announcements regarding six resident individuals with undeclared overseas income. Four of the cases involved supplementary tax payments exceeding 3 million yuan, with the highest amount hitting 6.987 million yuan.

Starting from March 2026, numerous Chinese residents with overseas accounts have received pop-up reminders on the Individual Income Tax App. The reminders indicate that tax authorities have identified potential overseas income for the relevant tax year via big data analysis.

On April 1, 2026, the State Taxation Administration held a regular press conference, stating that tax authorities will leverage data from the Common Reporting Standard (CRS) to analyze and cross-verify overseas income declaration data, and continuously strengthen tax supervision.

Against the backdrop of tightening CRS enforcement, many taxpayers have grown anxious. We have compiled and sorted out key questions raised by clients, covering major concerns of Chinese tax residents: What specific information is exchanged under CRS? Which tax years are covered by information exchange? How do tax authorities use such information to recover unpaid taxes? Is there a statute of limitations for tax recovery? Will undeclared income from previous years be directly deemed tax evasion? Are administrative fines and criminal liabilities applicable? How to respond to pop-up reminders on the Individual Income Tax App? How to properly complete tax declarations for overseas income? What changes will CRS 2.0 bring and what impacts will it generate?

To address these questions, Huashui hosted a live stream titled Tax Risks and Compliance Recommendations for Chinese Residents’ Overseas Income under the CRS Framework from 14:30 to 15:30 on June 5, 2026. The live stream reviewed the origin of CRS, explained the operating mechanism of CRS 1.0 and its impacts on China in light of the latest developments, analyzed tax risks faced by Chinese tax residents with overseas income, prospected updates under CRS 2.0 and relevant overseas legislative progress, and put forward targeted compliance suggestions for overseas income taxation.

II. Tax Risks Faced by Chinese Tax Residents Under the CRS Framework

Lawyers from Huashui pointed out that failure to declare and pay taxes on overseas income firstly constitutes non-compliance with tax declaration obligations, exposing taxpayers to administrative liabilities including supplementary tax payments and late payment surcharges. Improper handling will escalate the risks: for instance, acknowledging the overseas income declaration obligation via the app pop-up but refusing to file declarations, falsely stating no overseas income in response to the reminder, or submitting declarations with inconsistent factual information will be deemed tax evasion, either as refusal to declare after notification or fraudulent tax filing. Those who refuse to settle outstanding taxes, surcharges and fines will face charges of tax evasion and corresponding criminal liabilities.

In terms of tax obligation recognition, tax residents conducting frequent short-term stock trading may face the risk that profits and losses from stock transactions cannot be offset against each other. Individuals holding dual or multiple tax resident statuses across jurisdictions may be subject to double or multiple taxation.

In addition, residents conducting related transactions with overseas parties that violate the arm’s length principle will face transfer pricing adjustments. Residents holding shares in overseas companies where profits are retained without reasonable grounds will face tax adjustments on deemed profit distribution. Any unreasonable commercial arrangements adopted to obtain tax benefits will also trigger special tax adjustments.

Looking ahead, the full implementation of CRS 2.0 will bring three major changes and further escalate tax risks:

1.Crypto assets will be included in the scope of information exchange.

2.Ultimate beneficial owners of passive non-financial entities established overseas will be identified through transparency rules, and relevant entity account information will be shared with the tax jurisdictions of the beneficial owners.

3.For individuals with multiple tax resident identities, account information will be exchanged to all jurisdictions entitled to levy taxes, and selective reporting based on resident status will be prohibited.

III. Tax Compliance Guidelines for Chinese Taxpayers

Huashui lawyers recommend taxpayers take the following compliance measures:

1.Clarify tax resident status: Confirm whether you qualify as a Chinese tax resident or hold multiple resident identities, and define your tax obligations in China accurately.

2.Correctly classify overseas income: Distinguish between business income and remuneration for personal services to avoid errors in applicable tax rates and calculation methods.

3.Complete tax declarations in accordance with the law: File returns within the statutory period. Pay attention to differences in tax obligations between domestic and overseas income for special earnings such as deposit interest, stock transfer gains, dividends, fund distributions and retained profits.

4.Claim foreign tax credits legally.

5.Reasonably invoke the statute of limitations for tax recovery as a defense when applicable.

6.Resolve tax-related disputes at an early stage.

The final filing deadline for the 2025 Individual Income Tax Annual Reconciliation is June 30, 2026. With only 23 days remaining, Huashui reminds taxpayers with undeclared overseas income to seize the opportunity under the tax authorities’ five-step working procedure. Sort out the type, amount and acquisition time of overseas income, confirm income nature and applicable tax rates, and complete tax declarations and payments promptly. If you are unable to finish the declaration independently, engage professional tax practitioners for assistance to prevent the escalation of tax risks into tax evasion or criminal liability.

Contact Information

For consultation, case engagement, business cooperation and joining the CRS discussion group, please contact Huashui legal assistant:

Phone/WeChat: +86 138 1163 6372

Official Website: https://www.huashui.com

Tel: +86 10-64108688Fax: +86 10-64108288

Email: zixun@huashui.com