China’s Ministry of Finance and State Taxation Administration issued a regulation on July 24 clarifying the personal income tax treatment of offshore trusts. Under the new rules, Chinese tax residents must declare and pay personal income tax both when transferring assets into offshore trusts and on income generated during the trusts’ operation. The measure is designed to close a long-standing tax loophole and strengthen oversight of offshore wealth held by Chinese residents.
The regulation establishes tax obligations at each stage of an offshore trust’s lifecycle. At the establishment stage, transferring assets into an offshore trust will be treated as a taxable asset transfer, with taxable gains calculated as the asset’s market value minus its original cost and reasonable expenses. The resulting gains will be subject to a 20 percent personal income tax. During the trust’s operation, investment gains, interest, dividends, and other qualifying income will also be taxed annually at 20 percent, based on the nature of the income.
The regulation also introduces transitional arrangements for existing offshore trusts. Trusts established more than three years before the announcement will not be subject to taxes on the initial asset transfer, but income generated during the trust’s operation must still be declared regardless of when the trust was established. Taxpayers will be granted a three-month grace period to file returns without incurring late-payment penalties. The new rules underscore Beijing’s broader campaign to strengthen tax enforcement, curb offshore tax avoidance, and enhance oversight of cross-border assets held by Chinese residents.
Related reading: China Expands Tax Scrutiny of Offshore Trusts Held by Wealthy Individuals
Source: Xinhua, July 24, 2026
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