CHINA Law and Practice Contributed by: Chengchen Gan (Mark), Commerce & Finance Law Offices
individuals holding a US green card without US citizenship. They are unable to remit assets abroad through inheritance. • Secondly, applicants must prove the legal owner - ship of the property being transferred abroad and provide tax payment certificates. The legitimacy of inherited property can be established through ownership certificates or registration certificates, while tax payment proof requires tax certificates or documents issued by the tax authorities where the inherited property is located. • In practice, some high net worth families may encounter difficulties in proving the source of acquisition or tax compliance status of their assets acquired in earlier years, resulting in documenta - tion flaws or challenges. Tax Costs Chinese parents may encounter tax and reporting issues when passing on assets to their foreign chil - dren. Although there is currently no succession tax or gift tax in China for foreign children inheriting assets in the country, foreign individuals may still bear the risk of paying income tax in their home countries for such
Regarding “inherited or gifted property”, the exception applies when a will or gift contract specifies that the property belongs exclusively to one spouse. Under the PRC Civil Code, both spouses have equal rights to possess, use, benefit from, and dispose of marital common property. Except for matters within the scope of daily household affairs or those consti - tuting express authorisation, any unilateral disposi - tion of jointly owned property by one spouse does not have legal effect on the other spouse. To safeguard the lawful rights and interests of both parties regard - ing marital common property, the Civil Code also pro - vides remedies if one spouse intentionally conceals, transfers, sells, damages, squanders any common property, or fabricates joint debts without the other’s consent. In such cases, the aggrieved spouse can petition to the people’s court for division of the mari - tal common property. During divorce proceedings, the court may allocate a lesser share or no share to the offending spouse. Under the PRC Civil Code, spouses can establish agreements regarding property relations, categorised as prenuptial agreements and postnuptial agreements based on when they are executed. Both types require a written form according to the Civil Code. The details are as follows. Prenuptial Agreements These are commonly notarised agreements. The Civil Code specifies and supports the legality for this kind of agreement by stating: “Men and women can agree on the property acquired during the mar - riage and pre-marital property either belonging sepa - rately, jointly, partially separately, or partially jointly.” A prenuptial agreement becomes effective upon the establishment of the marriage. Clauses in prenuptial agreements that do not pertain to property regime are not necessarily legally bind - ing. For instance, agreements on post-divorce prop - erty distribution and child custody arrangements in practice are often deemed to be separate from the prenuptial agreement, as according to judicial inter -
overseas inherited income. 2.3 Forced Heirship Laws
Technically, China does not have forced heirship laws, but it has some similar provisions. For instance, the inheritance share for a fetus should be reserved dur - ing legacy division. Also, necessary assets should be preserved for heirs who are unable to work and have
no means of support. 2.4 Marital Property
The PRC Civil Code defines marital common prop - erty as the property acquired by spouses during the existence of their marriage. The term “acquired” refers to the property obtained by either or both spouses, including jointly acquired property or property acquired individually by one spouse. This definition focuses on property rights rather than the actual possession of the property. For instance, property obtained by one spouse through a lottery win, even if not physically possessed at the time of divorce, is still considered property acquired during the marriage.
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