On July 24, 2026, the Ministry of Finance and the State Taxation Administration (“STA”) issued the Announcement on Matters Concerning Individual Income Tax on Offshore Trusts (“Announcement 21“), and the STA concurrently issued the supporting Announcement on Administration Matters Concerning Individual Income Tax on Offshore Trusts (“Announcement 15“), along with relevant policy interpretations. These documents clarify, for the first time in a systematic manner, the individual income tax (“IIT”) treatment rules and administrative requirements for individuals holding, managing, and obtaining asset returns through offshore trusts. Their promulgation marks the official transition of the Chinese tax authorities’ tax supervision over offshore trusts from a “grey area” to a “comprehensive look-through,” require which will have a profound impact on the wealth management and offshore trust structures of high-net-worth individuals. Both Announcements came into effect on July 24, 2026.
1. Summary of the Key Points of the Announcements
Announcement 21 and Announcement 15 formulate detailed tax filing and accounting rules for the entire life cycle of offshore trusts, including “setup/injection, holding/operation, earnings distribution and termination.” We summarize the key points of each phase in the table below:
| Trust Life Cycle | Trust Settlor | Specific Circumstances | Taxpayer | Taxable Income | Taxable Income Item | Filing Time |
| Asset Injection | Resident | General circumstances | Resident individual | Market value at the time of asset injection less the original value of the asset and reasonable expenses | Income from property transfer | File tax returns with the tax authorities between March 1 and June 30 of the year following the asset injection |
| Two or more residents inject assets into the same offshore trust | Resident individual | Apportion the trust assets and income belonging to each individual based on the proportion of the market value of the offshore trust assets injected by the individual to the total market value of all offshore trust assets at the time of injection; the calculation formula is the same as above | ||||
| Non-resident | General circumstances | The non-resident | Market value of domestic-sourced assets less the original value of the asset and reasonable expenses | File tax returns with the tax authorities within 15 days of the month following the asset injection | ||
| The offshore trust is actually controlled by a resident individual | The resident individual | Deemed as the resident individual injecting assets into the trust (i.e., total market value at the time of asset injection less the original value of the asset and reasonable expenses) | File tax returns with the tax authorities between March 1 and June 30 of the year following the asset injection | |||
| Non-resident and resident inject assets into the same offshore trust | The resident individual | Deemed as entirely injected by the resident individual into the trust (i.e., total market value at the time of asset injection – original value of the asset and reasonable expenses) | ||||
| Holding/ Operation Period | Resident | General circumstances | The resident individual | Generated income (regardless of whether actually distributed) Income from property transfer = amount of property transfer income within a calendar year less the original value of the property and reasonable expenses (losses cannot be carried forward to offset in subsequent years) Interest, dividend, and bonus income = all types of income obtained within a calendar year other than the income from property transfer The above two types of income cannot offset each other Various expenses such as trustee remuneration, trust management fees, legal service fees, and investment advisory fees are not deductible Trust income for which IIT has been declared and paid as required above shall not be subject to declaration and payment of IIT again upon actual distribution | Income from property transfer OR Interest, dividend, and bonus income | File tax returns with the tax authorities for the taxes payable in the previous year between March 1 and June 30 every year |
| Resident becomes non-resident | The resident individual | Market value of the offshore trust assets on the day of becoming a non-resident individual less the original value | Interest, dividend, and bonus income | File tax returns with the tax authorities within 15 days of the month following the date of becoming a non-resident individual | ||
| Resident dies, and the offshore trust is inherited by other non-resident individuals or has no heir | The resident individual (declared and paid on his/her behalf by the trustee or his/her designated domestic institution) | Market value of the trust assets on the date of death less the original value | Interest, dividend, and bonus income | File tax returns with the tax authorities within 15 days of the month following the date of death of the resident individual | ||
| Inherited by other resident individuals | The resident individual inheriting the offshore trust | Generated income (see above) | Income from property transfer OR Interest, dividend, and bonus income | File tax returns with the tax authorities for the taxes payable in the previous year between March 1 and June 30 every year | ||
| Non-resident | Distributed to resident individuals | The resident individual(s) | Income distributed during the holding period | Interest, dividend, and bonus income | File tax returns with the tax authorities for the taxes payable in the previous year between March 1 and June 30 every year | |
| Distributed to a non-resident but actually obtained, used, controlled, or disposed of by other resident individuals | ||||||
| Non-resident dies and offshore trust is inherited by a resident | The resident individual | To be determined based on actual circumstances in accordance with the rules on the asset injection, operation, termination and inheritance of the offshore trust | Income from property transfer OR Interest, dividend, and bonus income | Refer to the applicable rules based on actual circumstances | ||
| Termination | Resident | The resident individual | Market value of all trust assets at the time of trust termination – original value and reasonable expenses | Interest, dividend, and bonus income | File tax returns with the tax authorities within 15 days of the month following the completion of liquidation. If the liquidation of the offshore trust is not completed within 60 days from the date of termination, the 60th day from the date of termination shall be deemed as the date of liquidation completion | |
| Non-resident | Resident obtains the trust assets | The resident individual | Market value of the assets at the time of trust termination | Interest, dividend, and bonus income |
Notes:
- Offshore trusts refer to trusts established under overseas laws and other overseas legal arrangements not designated a trust but functioning substantially similarly to a trust, but excluding financial products issued by banks, insurance companies, securities companies, fund companies, etc., that are regulated by financial regulatory authorities of the host country or region that independently conduct business, and bear risks with unspecified clients.
- Individuals injecting assets into offshore trusts refers to individuals (or through other individuals or organizations) transferring assets (including movable property, real estate, and other types of assets) owned or actually funded, responsible for, or controlled by them to offshore trusts or trustees of offshore trusts, as well as the offshore entities held, controlled, or managed by them for holding, management, utilization, and disposal of assets.
- The tax rate for income from property transfer or interest, dividend, and bonus income is currently 20%.
- Individuals who have acquired foreign nationality, overseas long-term or permanent residency, but whose main economic interests are derived from within China, may be deemed as resident individuals with a domicile.
- In the event of the termination of a resident individual’s offshore trust, the resident individual’s status changing to that of a non-resident individual during the trust’s term, or the death of a resident individual, the individual income tax accrued from January 1 of the current year through the date on which the relevant event occurs shall be reported and paid in accordance with the applicable rules set forth in the announcement.
- If an offshore trust is terminated or a resident individual dies, and there are difficulties in paying taxes on time, the tax may be paid evenly in instalments over 5 years upon filing with the tax authorities.
- A non-resident injects assets into an offshore Trust with the following circumstances, it shall be deemed as distribution of income to the related resident individual, who needs to declare and pay IIT:
(1) Providing mortgage, guarantee, or loan directly or indirectly for the debt of a resident individual with the trust assets, which is not released or repaid before December 31 of that year;
(2) Paying or reimbursing expenses on behalf of a resident individual, or allowing them to use the trust assets free of charge or at a significantly low price;
(3) Transferring assets, paying expenses, or providing other economic benefits to a resident individual through a third party;
(4) Providing the aforementioned economic benefits to a related party of the resident individual, or to an organization controlled or actually benefited by the resident individual. - Taxes in the nature of individual income tax that a resident individual has paid on his/her offshore trust overseas in accordance with local laws can be credited against the tax payable for the current period according to law when declaring and paying IIT.
2. Retroactive Requirements for IIT on Existing Offshore Trusts
Announcement No. 21 puts forward specific requirements for the declaration and payment of IIT on existing offshore trusts:
| Trust Life Cycle | Taxpayer | Taxable Circumstances | Filing and Payment Deadline |
| Injection | Resident | Unpaid IIT incurred from injecting assets into offshore trusts during the period from January 1, 2023 to December 31, 2025 | Declare and pay before October 22, 2026, without late fees. However, if the amount of unpaid IIT is large, tax authorities may legally extend the look-back period. |
| Non-resident | Unpaid IIT incurred from injecting assets into offshore trusts during the period from January 1, 2023 to the implementation date of Announcement 21 (i.e., July 24, 2026) | ||
| Holding | Resident | Before January 1, 2026, all income generated during the holding period of a resident individual’s offshore trust shall be declared and subject to IIT as “interest, dividend, and bonus income” | Declare and pay before October 22, 2026, without late fees. |
| Resident | Income distributed to resident individuals during the holding period of an offshore trust injected with assets by a non-resident individual | ||
| Resident | Income generated from a resident individual injecting assets into an offshore trust and during the holding period of the offshore trust from January 1, 2026 onwards | File tax returns with the tax authorities between March 1 and June 30 of the following year (i.e., starting in 2027). |
Note: Taxpayers who fail to pay IIT within the time limit must pay late fees. For acts constituting tax evasion, the tax authorities will recover the tax and late fees, and impose fines.
3. Retroactive Requirements for IIT on Existing Offshore Trusts
For a long time, there has been a lack of clear rules on the IIT treatment of offshore trusts, and different institutions have held different understandings of the applicable treatment. With the promulgation of the two announcements, parties will have a clearer legal basis for analysing the tax implications of transactions related to offshore trusts, which should reduce uncertainty involving tax declarations and payment for offshore trusts.
For clients who have already established offshore trusts, we would suggest conducting a special tax assessment as soon as possible to comprehensively examine the existing structures, including trust deeds, trustee arrangements, asset sources, and historical transaction documents, with a focus on confirming whether there are any potential taxable events, undeclared income, and excessive control arrangements, etc. At the same time, it would be advisable for clients to improve data retention and information management systems, establish long-term archives, and properly preserve trust establishment documents, asset valuation materials, investment return records, distribution records, tax filing documents, and overseas tax payment certificates.
For clients who will be involved with listed company control, offshore investment platforms, family offices, and cross-border inheritance arrangements in future, we would suggest carrying out tax feasibility studies prior to establishing the trust, taking various elements into consideration such as individual income tax inside and outside China, cross-border information exchange, tax reporting requirements, and supervision in foreign jurisdictions, so as to mitigate tax risks and optimize wealth management and family succession plans on a legal and compliant basis.
