Prudential shares tumble on report China will tax offshore insurance returns

By Danilo Masoni and Alun John

Aug 5 (Reuters) - Shares in insurer Prudential fell as much as 13% on Wednesday after Caixin reported Chinese mainland tax authorities have started levying personal income tax on returns from offshore insurance policies, the latest sign of greater scrutiny of offshore investments.

Authorities in Beijing and Hangzhou had already enforced the measures, applying a 20% tax rate to returns from Hong Kong policies, including dividend payouts and interest earned on prepaid premiums, according to the report, which cited tax lawyers and insurance insiders.

The plan would add to Beijing’s recent moves to tighten curbs on cross-border investment channels and intensify regulatory scrutiny over outbound investments to stem capital flight.

CRACKDOWN ON CROSS-BORDER INVESTMENTS

China's finance ministry and tax authority said last month they would impose individual income tax on assets placed in offshore trusts and ​the income they generate.

A late-May crackdown by Beijing on cross-border investments and its punishment of three online brokers for helping Chinese investors buy shares in foreign markets triggered a selloff in Prudential and other firms including AIA, Standard Chartered and HSBC.

These firms derive a significant share of their business from mainland Chinese customers, and the moves sparked fears sales of insurance policies and other financial products could slow.

Hong Kong was Prudential's largest profit contributor in 2025. In its annual results in March, it attributed its 12% growth in new business profit in the financial hub to sales growth across both domestic customers and visitors from mainland China. 

Prudential said at the time it was confident of the continuation of demand from visitors from mainland China. The insurer did not respond to a request for comment on Wednesday.

Its shares were last down 6%, bringing their year-to-date loss to 10%.

China’s finance ministry and the National Financial Regulatory Administration did not immediately respond to Reuters requests for comment outside of regular business hours.

Shares of HSBC, which has a big insurance business in Hong Kong, also dropped as much as 6%. It did not respond to a request for comment.

LEVIES 'HIGHLY LIKELY' TO AFFECT SALES, BROKER SAYS

Jefferies said the report had sparked "investor panic" in Prudential shares.

Analysts at the U.S. bank said the move would reduce the appeal of Hong Kong insurance products relative to domestic ones, but could also ease fears that Beijing may eventually ban offshore insurance sales outright.

Caixin said the tax collection drive has been made possible by data sharing under the Common Reporting Standard, which allows mainland authorities to track overseas policy details, adding that enforcement was expected to tighten further.

(Reporting by Danilo Masoni and Alun John; Additional reporting by Lawrence White in London and the Beijing Newsroom; Editing by Amanda Cooper and Jan Harvey)