On June 1, 2026, the State Council promulgated the Provisions of the State Council on Outbound Investment (the "Provisions"), which will become effective on July 1, 2026. For the first time, the Provisions set out in the form of administrative regulations a systematic set of rules, regulatory requirements, and legal liability for PRC domestic investors who undertake investment activities outside mainland China (hereinafter "outbound investment"). Previously, the regulation of outbound investment was mainly based on the Measures for Administration of the Outbound Investment by Enterprises, promulgated by the National Development and Reform Commission (the "NDRC") and the Measures for Administration of the Overseas Investment, promulgated by the Ministry of Commerce (the "MOFCOM").

In our first article of this series Tax Compliance for Chinese Individuals Investing Overseas (Part I): Key Tax Considerations for Three Types of Investors, we introduced three typical categories of overseas investors: (1) entrepreneurs holding domestic and overseas assets through offshore holding structures; (2) multinational executives working cross-border and receiving remuneration in different jurisdictions; (3) globally mobile individuals who have relocated overseas while maintaining Chinese nationality and significant economic connections with China.

On July 1, 2026, the Provisions of the State Council on Outbound Investment (the "Provisions"), promulgated by State Council Decree No. 837, came into force. One of their most closely watched features is the express inclusion, at the level of an administrative regulation, of "resident individuals in China" within the definition of "Investors". The change follows years of growth in cross-border asset allocation by individuals and families in the Chinese mainland. Portfolios that once centered on equities listed in the Hong Kong Special Administrative Region ("Hong Kong SAR") or the United States, and on funds and insurance policies established or issued outside the Chinese mainland, now often extend to real estate outside the Chinese mainland, family trusts and other structures. Regulatory data infrastructure has also matured. Financial-account information exchanged under the Common Reporting Standard (CRS), bank know-your-customer (KYC) records, foreign-exchange receipts and payments, individual income tax filings, entry and exit records, and anti-money-laundering monitoring may, subject to applicable law and implementation arrangements, make cross-border fund flows, accounts and asset structures easier to identify and assess.