Prudential shares fell as much as 13 per cent on Wednesday following reports that Chinese mainland tax authorities have started levying personal income tax on returns from offshore insurance policies. claim:4, claim:5

A Caixin report, citing tax lawyers and insurance insiders, stated that authorities in Beijing and Hangzhou have applied a 20 per cent tax rate to returns from Hong Kong insurance policies. This includes dividend payouts and interest earned on prepaid premiums. claim:2

The tax collection drive is supported by data sharing under the Common Reporting Standard, which allows mainland Chinese authorities to track overseas policy details. claim:3

13%

Drop in Prudential's London-listed shares on Wednesday

Market reaction

The report triggered wider declines in the financial sector on Thursday. Prudential shares fell more than 5 per cent, while AIA Group shares slid 8.2 per cent and Hong Kong-based FWD Group shares dropped 4.5 per cent. claim:6, claim:7, claim:8

In Hong Kong, the Hang Seng Index dropped more than 2 per cent in early trading. Other affected stocks included HSBC's Hong Kong-listed shares, which fell 2.2 per cent, and Standard Chartered, which was down 1 per cent. claim:9, claim:11, claim:12

Ping An Insurance and China Life Insurance shares were also down more than 1 per cent. claim:10

Analyst perspective

Analysts at the US bank Jefferies said the report had sparked 'investor panic' in Prudential shares. They noted the move would reduce the appeal of Hong Kong insurance products relative to domestic ones, though it could also ease fears of an outright ban on offshore insurance sales by Beijing. claim:15, claim:16

This follows a crackdown in late May by Beijing on cross-border investments, which saw three online brokers punished for assisting Chinese investors in buying foreign market shares. That event previously triggered a selloff in Prudential, AIA, Standard Chartered, and HSBC. claim:19

Last month, China's finance ministry and tax authority stated they would impose individual income tax on assets in offshore trusts and their generated income. claim:18

Company context

Hong Kong is projected to be Prudential's largest profit contributor in 2025. claim:20

Prudential attributed its 12 per cent growth in new business profit in Hong Kong to sales growth from both domestic customers and visitors from China. claim:17

China's finance ministry and the National Financial Regulatory Administration did not immediately respond to requests for comment. claim:14