Overview
- The Ministry of Finance on Friday, July 24, 2026 formalized rules that treat income generated by offshore trusts funded by Chinese tax residents as directly attributable to the settlor and taxable immediately.
- The framework classifies trust profits as annual taxable income — such as property-transfer income or interest, dividend and bonus income — and requires reporting even if the trust makes no distribution.
- Officials offered a 90-day voluntary-compliance window for trusts set up between January 1, 2023 and December 31, 2025 to declare and settle unpaid liabilities without late-payment surcharges and allowed simplified reporting for earlier income.
- Local tax bureaus in wealth hubs including Shanghai, Jiangsu and Shenzhen have been collecting offshore trust income data and issuing assessments since early 2025, with at least one reported case applying a roughly 20% tax plus penalties.
- The change targets common offshore centres such as Hong Kong, the Cayman Islands, the British Virgin Islands and the Cook Islands and is expected to prompt restructuring of trusts, asset relocations, possible residency changes by wealthy owners, and pressure on Hong Kong-linked holdings; the move follows a surge in use of such trusts by Chinese entrepreneurs after 2018.