‍News Summary

On November 11, 2025, the tax authorities of four provinces—Beijing, Fujian, Guangdong, and Sichuan—along with Xiamen in Fujian and Shenzhen in Guangdong, simultaneously exposed 6 typical cases of overseas income that were not declared according to law. The amount of back taxes and late payment fines recovered ranged from 510,000 yuan to 6.987 million yuan. At the same time, the tax authorities are conducting guidance and standardization for resident individuals who obtained overseas income but failed to declare it. Tax authorities also reminded: taxpayers who have obtained overseas income, if they find problems in their previous declarations, especially underreporting or omitting overseas income, must correct them promptly and eliminate tax-related risks in a timely manner.

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FinTax Commentary

1 Overseas Income Tax Supervision Gets Tougher: What Signals Do the Two 'Back Tax Waves' Send?

In fact, this is not the first large-scale inspection conducted by the tax authorities this year. As early as March 2025, tax authorities in four regions—Hubei, Shandong, Shanghai, and Zhejiang—simultaneously carried out inspections, legally addressing risks for taxpayers who obtained overseas income but failed to declare it. The back taxes recovered ranged from over 120,000 yuan to over 1.4 million yuan. This year's two "back tax waves" exhibit the following distinct characteristics, collectively signaling a strong regulatory message:

Uniform National Deployment, Centralized Action. In both 2025 actions, local tax authorities showed high consistency in the timing and wording of their announcements, indicating that these large-scale investigations targeting personal overseas investment income are not spontaneous local actions, but a new round of CRS special supervision uniformly deployed by the State Taxation Administration (National Tax Administration).

Multiple Batch Inspections, Upgraded Supervision Methods. Based on clues from tax big data analysis, local tax authorities are able to conduct batch inspections and identify undeclared tax discrepancies in residents' overseas income. They are also systematically advancing enforcement using the "Five-Step Workflow". The upgrade in supervision methods means that an individual's past "voluntary declaration" of overseas income will gradually transition into strict substantive tax audits by the tax authorities.

Varying Back Tax Amounts, Broad Coverage of Individuals. The enforcement cases disclosed in November 2025 show a significant increase in the average back tax amount per case compared to March, reflecting the gradual intensification of enforcement. This is also accompanied by residents in multiple areas receiving text messages and phone reminders from the tax bureau, which sends a message: the tax audit targets are no longer limited to a certain group; the tax compliance status of overseas earnings for both the middle class and high-net-worth individuals are within the tax authorities' scope of attention.

The tax supervision of personal overseas income is developing towards a trend of precision, normalization, and standardization. The channels through which the national tax authorities obtain information on taxpayers' overseas income are becoming increasingly smooth, enabling them to accurately identify undeclared overseas income, with broad coverage of individuals and deep enforcement efforts. In the enforcement cases, tax authorities also emphasized taxpayers' initiative to correct errors and voluntarily make corrections, reserving time and space for rectification for taxpayers with tax-related risks. Therefore, 2025 is not only a key turning point for the internationalization of China's tax supervision, but also an important window period for the majority of taxpayers to self-examine tax risks and implement tax compliance.

2 Why Now? Three Key Contexts for the Upgrade in Overseas Income Tax Supervision

2.1 The Policy and Legal Basis is Becoming More Complete

Since 1998, China has gradually begun to clarify the legal basis for taxing residents' overseas income, and has progressively established a tax legal system for overseas income, with the Interim Measures for the Collection and Administration of Individual Income Tax on Overseas Income as its core. In 2020, the State Taxation Administration issued the Announcement on Relevant Individual Income Tax Policies for Overseas Income (State Taxation Administration Announcement No. 3 of 2020), which further detailed the scope of overseas income and its tax administration methods. In 2025, the State Taxation Administration issued the Administrative Measures for the Final Settlement and Payment of Individual Income Tax on Comprehensive Income (State Taxation Administration Order No. 57), which once again stressed that taxpayers who obtain overseas income should declare it factually according to relevant regulations. As a result, China has constructed a relatively complete tax legal system for overseas income, and strengthened supervision is a natural continuation of policy implementation.

2.2 International Tax Information is Being Shared

In February 2014, the Organisation for Economic Co-operation and Development (OECD) adopted the Standard for Automatic Exchange of Financial Account Information in Tax Matters (AEOI). This standard consists of two parts: first, the "Model Competent Authority Agreement" (which stipulates how tax authorities in different countries exchange financial account tax information automatically); and second, the "Common Reporting Standard" (CRS) (which stipulates the requirements and procedures for financial institutions to collect and report account information of foreign tax residents, both individuals and enterprises).

In September 2014, China committed to implementing AEOI. In September 2018, China conducted its first automatic exchange of non-resident financial account tax information with foreign countries. Following the CRS framework, Chinese tax authorities can use the information exchange mechanism to obtain key information about accounts held by resident individuals in overseas financial institutions, including the account holder’s name, address, taxpayer identification number, year-end balance or net worth, and interest, dividend income, and gains from the transfer of financial assets obtained during the calendar year. This information is generally reported by overseas financial institutions to their local tax authorities, which is then exchanged between that country's national tax authority and the Chinese tax authority. The entities obligated to report information are extensive, covering banks, brokerages, insurance companies, trusts, and various other financial institutions.

Currently, CRS has been widely implemented globally. China has integrated the CRS rules into its national policy system and continuously increases the breadth and depth of international tax administration cooperation, having achieved normal automatic exchange of financial account information with over 100 countries and regions (including the UK, Singapore, Switzerland, etc.). International tax information sharing provides crucial data support for tax supervision, enabling Chinese tax authorities to more accurately and comprehensively identify overseas income that has not been declared according to law.

Image of: Current status of commitment to implement the Standard for Automatic Exchange of Financial Account Information (AEOI) across various countries

2.3 Overall Enhancement of Tax Collection and Administration Capabilities

China's level of tax collection and administration modernization continues to improve, and its efficiency is constantly increasing. Under the broad context of Phase IV of the Golden Tax Project (Golden Tax IV), administering tax based on data, and inter-departmental collaboration, tax authorities are able to effectively advance the clearing of overseas income, extending supervision from high-net-worth individuals to ordinary investors, achieving normalization of supervision and precision in enforcement.

Tax big data has become an important support for tax authorities to implement tax supervision. Since 2021, the National Smart Tax Supervision Platform, Phase IV of the Golden Tax Project (referred to as "Golden Tax IV"), has been gradually implemented, achieving comprehensive and deep application in 2025, and has entered the planning and advancement stage for Golden Tax V. Golden Tax IV is built by integrating modern technologies such as big data, cloud computing, artificial intelligence, and blockchain, supporting the real-time sharing of full-volume data from dozens of departments, including tax, banking, and industry/commerce. This means that through inter-departmental collaboration, tax authorities can integrate relevant payment data, entry/exit data, and foreign payment data of Chinese residents, comprehensively assess risks, and implement penetrating supervision. In practice, this also plays a key role in the tax authorities' acquisition of overseas tax-related information and audit of tax-related risks.

3 Next Stop: The Era of Crypto Asset Tax Transparency Has Arrived

3.1 Crypto Asset Income Can No Longer Be Hidden

Currently, Chinese tax authorities have achieved in-depth supervision of core data, such as overseas account balances and investment income, through means like CRS information exchange. Against the backdrop of global tax transparency and the upgrade of regulatory technology, the tax issues concerning cross-border income from crypto assets deserve greater attention.

CRS also applies to some capital flows related to crypto assets. In August 2022, the OECD adopted a series of revisions to the CRS framework, incorporating certain electronic money products and central bank digital currencies. At the same time, it clarified that indirect investments in crypto assets through derivatives and investment vehicles are also included within the scope of CRS regulation.

Furthermore, in October 2022, the OECD also launched the Crypto-Asset Reporting Framework (CARF). The framework is hailed as the "CRS for the crypto world", which stipulates the reporting of tax information on crypto asset transactions in a standardized manner, with the aim of automatically exchanging such information. Although mainland China has not explicitly joined CARF, as a deep participant in CRS, it is expected to follow suit. Hong Kong, China, however, has committed to participating in CARF exchange starting in 2028, and exchanges registered in Hong Kong, China, may report the information of mainland residents. When that happens, mainland tax authorities will be more easily able to identify tax violations in this area.

As the scope of CRS expands and the CARF framework is implemented, on-chain activities such as crypto transactions conducted through overseas trading platforms, DeFi income, and NFT transactions will no longer be blind spots for taxation. Through cross-border information exchange, tax authorities can track user transaction records on compliant crypto platforms, and even decentralized wallet addresses may be identified through association with off-chain identity information. At the same time, China’s tax administration policies for crypto asset income are still pending clarification, which also provides a policy buffer period for crypto asset holders to prepare for tax planning.

3.2 Suggested Measures for Crypto Asset Tax Compliance

Regarding overdue declarations or deliberate concealment of overseas income, Article 32 and Article 63 of the Tax Collection and Administration Law stipulate a progressive scale of penalties for taxpayers who fail to file on time or make false declarations, ranging from tax recovery and accumulated late payment fines to administrative penalties and even criminal punishment: a late payment fine of $0.05\%$ of the overdue tax is added daily, starting from the day after the statutory declaration deadline. For tax evasion, in addition to the full recovery of taxes, a fine of $50\%$ to 5 times the underpaid tax amount will be imposed. If the amount involved meets the standard for criminal prosecution, criminal responsibility will be pursued.

From a legal liability perspective, the cost of late payment fines and penalties for post-event supplementary payment may far exceed the originally due tax. Crypto asset holders should consider truthfully declaring and paying taxes while implementing reasonable tax arrangements. Specifically, they can work on improving their tax compliance system in three ways: first, comprehensively review overseas assets and income, organize information on various financial accounts and digital asset wallets opened overseas, and establish a complete archive of transaction records. Second, classify various crypto incomes and accurately determine the nature of the income and the tax payment status, either independently or with the help of professionals. If tax has already been paid overseas, the amount of tax credit must be accurately calculated, and legal tax payment certificates must be obtained. Third, based on the above, establish a personal tax health check mechanism and utilize professional tax tools to automate tax compliance procedures.

4 Conclusion

The continuous actions of the tax authorities from the beginning to the end of this year indicate that the tax supervision of personal overseas income is developing towards a trend of precision, normalization, and standardization. The domestic "back tax wave" has drawn attention, and the era of global tax transparency has arrived. As an emerging asset class, crypto assets are rapidly being incorporated into national tax regulatory frameworks. For Web3 Participants, tax planning capabilities are essential. Only market participants who proactively adapt to regulatory requirements and focus on compliance can maintain a competitive advantage in the global crypto ecosystem and achieve sustainable development.

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