China’s tax authorities are accepting reasonable explanations when enforcing new rules on offshore trust gains, according to an executive who says their appeal was successful, offering some reassurance as a 90-day grace period expires on Thursday.
The approach appears to be translating into greater clarity from regulators. Earlier this week, the State Taxation Administration published a question-and-answer series that suggested Beijing was implementing the rules in line with international practice.
“We successfully defended ourselves,” said a person familiar with the matter at a Hong Kong-listed mainland Chinese company, who asked not to be identified because the issue was sensitive.
About a month before the latest clarification was issued, the company was asked to pay tax related to an offshore trust for a non-Chinese executive. It appealed on the grounds that the vehicle was a stock incentive trust set up in 2021 before the company’s initial public offering (IPO), said the source.