BEIJING: China has introduced a 20% individual income tax on certain gains and income linked to assets placed by Chinese residents into offshore trusts, tightening scrutiny of wealth held overseas.
The Ministry of Finance and the State Taxation Administration issued detailed rules covering the taxation of offshore trusts, including requirements for taxpayers to declare and settle outstanding liabilities.
Under the new rules, gains arising when assets are transferred into offshore trusts are subject to a 20% tax, while income generated during the lifetime of the trusts can also be taxed at the same rate, depending on the nature of the income.
Chinese taxpayers have been given a 90-day period to declare and settle certain unpaid taxes. The rules cover assets transferred to offshore trusts from Jan. 1, 2023, as well as specified income from trusts established before 2026.
The measures are part of Beijing’s broader efforts to strengthen tax compliance and close gaps that have allowed wealthy Chinese individuals to hold assets through offshore structures.
Hong Kong and Singapore are among the major destinations for offshore wealth and trust structures used by China-linked wealthy families.
The new rules are expected to increase scrutiny of such arrangements and encourage greater transparency in overseas wealth management.
China’s tax authorities have also clarified that individuals who hold foreign citizenship or permanent residence abroad may still be considered Chinese tax residents in certain circumstances if their main economic interests remain closely connected to China.
The new rules mark a significant tightening of China’s approach to offshore trusts and overseas wealth, placing greater responsibility on taxpayers to report assets and income and comply with individual income tax requirements.