Estate planning in China

Updated: Jul 10, 2018

Estate Planning is one of the things that many of use do not much care looking after it. There are many reasons why people tends not to pay attentions such as the complexity of estate planning system, unknown about issues may arise in future and reality is people are too busy to think for prospective inheritors.


Estate planning in China

There is currently no inheritance or gift tax in China. An inheritance tax was proposed in the 1994 tax reform, but it has never been enacted. It is understood that an inheritance tax law is currently being drafted in China and it may become law in the near future.

To calculate the total tax on deceased property, user will enter the Deed tax rate, Gift tax rate and the status or future planning of estate allocations amount. User would be able to calculate the taxes paid up on death and how user can potentially save the estates tax.


Deed tax is imposed at progressive rates, from 3% to 5%, in the total value of land use rights or building ownership rights when transferred. 


In accordance with the provisions of China Tax Circular — Caishui (2009) No.78 (Circular 78) — if a transfer of real estate or land-use rights is made without consideration, the property received would be considered “other income” to the recipient and subject to IIT at a flat tax rate of 20%. However, according to Circular 78 and Tax Circular Guoshuifa (2009) No. 121, the transfer by virtue of inheritance or gift under the following circumstances will be exempted from the IIT:

  • Gratuitous transfer of land-use rights or real estate to lineal relatives (i.e., spouse, children, parents, grandparents, grandchildren and siblings).

  • Gratuitous transfer of land-use rights or real estate to dependents. • Gratuitous transfer of land-use rights or real estate to statutory heirs and legatees upon the death of the decedent.

  • Gratuitous transfer of land-use rights or real estate to a spouse by virtue of divorce.

Reference

  1. China - State Administration of taxation of the people's republic of China website: http://www.chinatax.gov.cn/2013/n2925/index.html 

  2. China - International Estate Planning Guide

Due to the dynamic nature of tax laws, refer to China State Administration of taxation of the the people's republic of China website for most accurate information. 

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