Hong Kong-listed insurance stocks, including AIA Group Ltd (01299.HK) and Prudential plc (02378.HK), experienced a broad decline on the morning of August 6. AIA Group Ltd opened lower and fell sharply, dropping as much as 9.71%. By the midday close, AIA Group Ltd was trading 8.75% lower at HK$70.95. Prudential plc also spent most of the morning session fluctuating between a 5% and 6% loss, at one point falling over 6%, before settling 5.8% lower at HK$107.1 by the midday close.
The decline extended to other financial institutions. Shares of HSBC Holdings plc (00005.HK), which owns the Hong Kong insurance arm, fell 2.28% by midday. Standard Chartered plc (02888.HK) also declined by 1.54% during the same period.
Market sentiment was impacted by a media report on August 5 suggesting that some Hong Kong insurance policyholders had received tax notices for their overseas income, with Hong Kong insurance returns now included in the taxable scope. The current applicable tax rate is reportedly 20%, with cases involving taxation already identified in Beijing and Hangzhou, Zhejiang Province. Social media posts reviewed by a financial news outlet show that some users in specific regions claim to have received notices to pay taxes on overseas income, including earnings from Hong Kong insurance policies. While some of these posts are recent, others date back to November of last year, indicating the phenomenon is not yet widespread.
Attempts to contact some of the individuals who posted these claims were unsuccessful at the time of reporting. Interviews with various professionals, including intermediaries with years of experience in the Hong Kong insurance business, legal experts in family offices, and private wealth management service providers, revealed that none of their clients have yet reported receiving such tax notices. However, these professionals widely believe that the taxation of Hong Kong insurance policy gains is an expected development. The situation regarding the taxation of Hong Kong insurance policies continues to be monitored.