The tax filing period for resident individuals declaring overseas income earned in 2025 will close on June 30. After the deadline, will adjustments be made to the statute of limitations for recovering unpaid overseas income taxes and the practical implementation rules for income from stock transactions? What tax risks will resident individuals face if they fail to file tax returns for overseas income or submit filings with figures materially inconsistent with data held by tax authorities? With only 18 days remaining, how can resident individuals complete tax filings in full compliance with regulations? This article analyzes the above issues and puts forward corresponding recommendations.

I. Analysis of the Tax Landscape for Resident Individuals with Overseas Income

According to incomplete statistics, tax authorities across multiple regions issued public notices in 2025 and penalized resident individuals who failed to file taxes on overseas income, recovering nearly 30 million yuan in back taxes and late payment surcharges. Between January and May 2026, approximately 13 billion yuan in taxes was repaid by relevant resident individuals. These figures demonstrate that tax authorities have normalized enhanced supervision over overseas income by leveraging data exchanged under the Common Reporting Standard (CRS).

Pursuant to the Tax Collection and Administration Law of the People's Republic of China, where a resident individual underpays taxes due to failure to file tax returns for overseas income, the general statute of limitations for tax recovery is three years. If the total underpaid tax exceeds 100,000 yuan, the limitation period will be extended to five years. Based on practical experience, most tax authorities currently adopt the 3-year limitation period, given the generally low awareness among resident individuals of their tax obligations for overseas income. Accordingly, tax authorities require taxpayers to conduct self-inspections and settle outstanding taxes on overseas income earned from 2022 to 2024.

In addition, under the Individual Income Tax Law of the People's Republic of China, income derived from personal stock transactions is categorized as income from property transfer, subject to individual income tax at a flat rate of 20% on a per-transaction basis. Specifically, income from stock trading on domestic secondary markets is temporarily exempt from individual income tax, while no exemption applies to income from direct overseas stock trading, which must be declared in the subsequent tax year. In practice, many resident individuals trade US stocks via platforms such as Futu Securities. Such transactions feature high trading frequency, sharp price fluctuations and frequent profits and losses. There exists a legal vacuum regarding whether profits and losses from stock transactions within a single tax year can be offset against each other. For the sake of tax equity, tax authorities currently allow resident individuals to declare and pay individual income tax on overseas stock transactions after offsetting profits against losses incurred within the same tax year.

It is noteworthy that after over a year of routine supervision, policy publicity and case-based legal education, tax compliance among resident individuals with overseas income has improved markedly. Furthermore, the Third Plenary Session of the 20th Central Committee of the Communist Party of China explicitly proposed standardizing tax policies on capital gains and property income, with related tax reform steadily advancing. In the long run, the enforcement standards for tax administration on overseas income are expected to be gradually tightened, and relevant policies will be further clarified. Resident individuals are advised to seize the final window period for tax filing.

II. Tax Risks Faced by Resident Individuals under the CRS Information Exchange Mechanism

According to the 2024 Peer Review Report on the Automatic Exchange of Financial Account Information issued by the Organisation for Economic Co-operation and Development (OECD), a total of 114 jurisdictions have implemented the automatic exchange of tax-related financial account information between 2018 and 2024. At a regular press conference held by the State Taxation Administration (STA) on April 1 this year, relevant officials reminded the public: "Resident individuals shall pay individual income tax in accordance with the law on all income derived both within and outside China. Taxpayers with overseas income must complete tax returns covering all domestic and overseas income by the end of June. Leveraging data from the Common Reporting Standard (CRS) and other sources, tax authorities will analyze and compare declared overseas income data and keep tightening tax supervision."

It is evident that tax authorities are continuously monitoring tax-related information in resident individuals’ financial accounts via the CRS mechanism. The major tax risks confronting resident individuals are outlined as follows:

First, the risk of back tax repayment and late payment surcharges. Under Articles 1 and 10 of the Individual Income Tax Law of the People's Republic of China, resident individuals who earn overseas income shall file tax returns and pay individual income tax independently in China. Article 13 stipulates that resident individuals obtaining overseas income shall complete tax filing between March 1 and June 30 of the subsequent year.

Article 64 of the Tax Collection and Administration Law of the People's Republic of China states: "Where a taxpayer fails to file tax returns and consequently fails to pay or underpays the due tax, the tax authority shall recover the unpaid or underpaid tax and late payment surcharges, and impose a fine ranging from 50% to five times the amount of the unpaid or underpaid tax." Article 32 further provides: "Where a taxpayer fails to pay tax within the prescribed time limit, or a tax withholding agent fails to remit withheld tax as required, the tax authority shall order payment within a time limit and impose a daily late payment surcharge at a rate of 0.05% of the overdue tax starting from the date the tax becomes overdue."

Resident individuals are subject to unlimited tax liability. Those with overseas income must finish tax filing and payment by June 30 of the following year. For late filers, apart from settling the outstanding tax, a daily late payment surcharge of 0.05% will be accrued from July 1 until the full tax is paid. In current tax enforcement practices, cases involving undeclared overseas income are mostly disposed of by recovering back taxes and imposing late payment surcharges, with administrative penalties being relatively rare.

Second, the risk of being deemed tax evasion. Paragraph 1 of Article 63 of the Tax Collection and Administration Law defines tax evasion as: "Where a taxpayer refuses to file tax returns upon notification by tax authorities, or submits false tax returns, thereby failing to pay or underpaying the due tax..." For tax evasion, the tax authority shall recover the unpaid or underpaid tax and late payment surcharges, and impose a fine equivalent to 50% to five times the unpaid tax; if the act constitutes a crime, criminal liability shall be pursued in accordance with the law.

Tax authorities notify resident individuals of their tax obligations for overseas income via text messages, phone calls, pop-up reminders on the Individual Income Tax App and other means. At this stage, failure to file tax returns may evolve from inadvertent tax omission into intentional tax evasion, which falls into two scenarios:1.some individuals disregard SMS reminders, phone calls and pop-up notifications on the Individual Income Tax App. They tick the box stating "I acknowledge my obligation to declare overseas income and undertake to file tax returns in compliance with the law" yet fail to submit tax declarations. Such conduct constitutes tax evasion by refusing to file returns after being notified by tax authorities.2.others select the option "I confirm that I earned no overseas income in the declared tax year" in the App pop-up window, or file tax returns with key taxable items drastically inconsistent with actual facts. This amounts to tax evasion through false tax declaration.

Both acts demonstrate evident subjective intent and result in non-payment or underpayment of taxes. The involved resident individuals may be found guilty of tax evasion and face a fine ranging from 50% to five times the underpaid tax amount. Furthermore, there is no time limit for tax recovery in confirmed tax evasion cases. Tax authorities are entitled to recover all unpaid taxes from the individual for all preceding tax years in accordance with the law.

Third, the risk of tax evasion escalating into the crime of tax evasion. Article 201 of the Criminal Law of the People's Republic of China stipulates: "Where a taxpayer evades taxes by adopting deceptive or covert means to file false tax returns or refrain from filing returns, if the amount of evaded tax is relatively large and accounts for over 10% of the total tax payable, the taxpayer shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention, and shall also be fined. If the evaded tax amount is huge and accounts for over 30% of the total tax payable, the taxpayer shall be sentenced to fixed-term imprisonment of three to seven years, and shall also be fined... Any person who commits the act specified in the first paragraph shall be exempted from criminal liability if they pay the full amount of taxes owed and late payment surcharges, and accept administrative penalties after receiving a tax recovery notice issued by tax authorities pursuant to law."

Tax evasion of over RMB 100,000 is deemed a "relatively large amount". If a resident individual underpays taxes by more than RMB 100,000 (accounting for over 30% of the total tax payable) due to failure to file returns or submission of false declarations, and still refuses to settle the outstanding dues after receiving official notices for tax filing, rectification, tax recovery and fine payment, administrative tax risks will evolve into criminal liability.

It should be noted that the Judicial Interpretations on Tax-related Cases jointly issued by the Supreme People's Court and the Supreme People's Procuratorate in 2024 revised the constitutive elements of the crime of tax evasion. Conduct such as concealing income via dual contracts and splitting income under third parties' names is classified as false tax declaration. Accordingly, underreporting overseas income through dual contracts and dividing overseas income into accounts held by relatives and friends are typical acts of false tax declaration. With the in-depth application of the Common Reporting Standard (CRS) going forward, tax authorities will impose severe sanctions on such tax-related illegal activities.

III. Measures for Resident Individuals to Avoid Tax Risks During the Final Filing Period

First,Conduct a full review of overseas account information and clarify the scope of tax obligationsResident individuals shall sort out all overseas financial accounts under their name, including overseas bank accounts, custodial accounts, cash-value insurance contracts, annuity contracts and other overseas financial accounts. A thorough review of overseas financial assets and accounts helps define the scope of taxable income and underpins compliant tax filing.

Second, Classify overseas income types and file and pay taxes truthfully in strict accordance with the lawOverseas income from personal service remuneration, author’s remuneration and royalties shall be combined with domestic comprehensive income for consolidated individual income tax calculation. Overseas business income shall be aggregated with domestic business income for combined tax declaration. Overseas interest, dividends, bonuses, income from property leasing, income from property transfer and incidental income shall be taxed separately without consolidation with domestic income. Taxpayers shall strictly apply corresponding tax calculation rules to ensure compliant declaration and tax payment.

Third, Consult tax lawyers in a timely manner for complex issuesTo prevent filing errors and the resulting tax evasion risks stemming from false declarations, individuals encountering complicated scenarios — such as judging the taxability and category of overseas income — are recommended to engage professional tax counsel. Professionals can assist with accurate tax filing, proper retention and submission of supporting documents, as well as effective communication with tax authorities, so as to stop tax risks from escalating.