A Study on the Legal Issues of Imposing an Exit Tax in China

Abstract

With the acceleration of globalization, the emigration of high-net-worth individuals has become increasingly common. Some emigrants circumvent tax obligations and transfer assets by renouncing their nationality, leading to capital outflows and disputes over tax sovereignty. This paper defines the concept of exit tax and analyzes the necessity of imposing such a tax in China from three perspectives: curbing capital outflows, regulating tax avoidance, and safeguarding tax sovereignty. It also demonstrates the feasibility based on China's tax collection and management capabilities and legal foundation. Meanwhile, it identifies the shortcomings of China's existing "tax settlement upon deregistration of household registration" provisions, including their failure to tax unrealized capital gains, regulate overseas assets, and establish effective collection periods. Drawing on the extraterritorial experiences of the United States and Canada, this paper proposes institutional recommendations for China's exit tax system in terms of taxpayer definition, tax base, rate design, and collection procedures, providing a reference for improving China's tax system.