Updated: Jul 2, 2023
Creating a practical and efficient estate plan is a crucial step in securing your estate's future for ensuring the distribution according to your wishes. For Muslims living in China, this process becomes even more important due to the specific considerations of Islamic law and the tax implications that may arise. Given the significant Muslim population in the People's Republic of China, it is essential to address these aspects effectively. When it comes to estate planning, Muslims need to be aware of various taxes that could impact their wealth management and estate planning. In addition to common taxes such as inheritance tax, estate tax, deed tax, property transfer tax, and gift tax, Muslims must also consider the specific requirements of Islamic law. Your estate planning goal involves ensuring that the distribution of assets complies with Sharia principles, which can be complex and extend over multiple generations. To meet these requirements, it is essential to have a well-crafted Islamic estate plan that addresses both legal and religious compliance. Wassiyyah provides a customized solution for Chinese Muslims seeking comprehensive estate planning. Wassiyyah understands the specific needs of Muslims in China and offers tailored services that ensure adherence to Islamic law while optimizing tax efficiency. Islamic estate planning involves establishing an Islamic Will or Trust that considers the distribution of assets according to Sharia principles. This process requires careful consideration of various factors, such as identifying heirs according to Islamic inheritance laws, specifying the proportion of assets to be allocated to each heir, and addressing any charitable distribution known as a "Testamentary bequest" Wassiyyah has worked with experts to provide solutions to meet compliance. Wassiyyah structures Islamic estate plans that meet both legal requirements and Islamic law compliance. By offering these solutions, Wassiyyah aims to help Muslims in China protect their wealth, ensure a smooth transfer of assets, and minimize tax implications. So, for Muslims living in China, estate planning concerns legal requirements and tax implications. By considering the complexities of Islamic inheritance law and offering customized solutions, Wassiyyah provides peace of mind and financial security to Muslims in China.
There is no gift, endowment, wealth, estate, death, or inheritance 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 future. However, it does levy a transfer fee on the transfer of real estate property upon death. Inheriting a house worth 1 million euros would cost around 80.000 euros in fees. Therefore, real estate should not be held directly if possible. There may be solutions under company law.
Article 3 of the Deed Tax Law of the People's Republic of China states the 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. The Deed tax is due on inheritance Article 6(5) states, "acceptance of land use rights or house ownership by the heir at law through inheritance." However, under forced intestacy heirship, the Deed tax is exempted for certain individuals (i.e., spouse, children, parents, siblings, and grandparents). Outside of Intestacy, the inheritors named under a will is not a forced heirs, and these individuals shall pay the deed tax while inheriting the land and house of the decedent under forced heirship. You can find further details under Article 6 of the Deed Tax Law of the People's Republic of China. The Deed tax amount is calculated by multiplying the base for tax calculation with the tax rate at 3.5%, and you can find more details in Articles 3, 4, and 5 about this calculation. The deed tax must be reported and paid upon transfer of legal title of the real estate at the real estate trading office.
There is no death grant upon death in China.
Article 2(8) Individual Income Tax Law of the People's Republic of China states that the taxes shall be paid on income from the property transfer. However, certain individuals (for example, gratuitously transferred to a forced heir) are exempted from paying tax.
Article 1 of the Civil Code of the PRC (the 'Civil Code') on individual tax returns, refers to two situations: First, Individuals domiciled in the PRC, or individuals who have no domicile in China but have resided in the country for 183 days or more in one tax year, shall pay IIT (Individual Income tax) on income earned within or outside China. Second, Individuals who have no domicile and do not reside in the PRC, or who have no domicile but have resided in China less than 183 days in one tax year, shall pay IIT on their income earned within China.
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