China Introduces 20% Income Tax on Offshore Trusts

On July 24, 2026, China’s Ministry of Finance and State Taxation Administration issued new regulations that subject Chinese tax residents to a 20% personal income tax on offshore trusts. The rules require taxpayers to declare and pay tax when transferring assets into an offshore trust, treating the transfer as a taxable asset event based on the market value less cost and expenses. They also levy the same rate annually on income generated by the trust, including investment gains, interest, and dividends.

Transitional provisions exempt trusts established more than three years before the announcement from tax on the initial asset transfer, but income earned thereafter remains taxable. A three‑month grace period is provided for filing returns without penalties, and a deadline of October 22, 2026 is set for reporting previously unreported income. The regulations are retroactive, covering built‑in gains, unrealized appreciation, and distributions from offshore trusts funded by non‑residents. The measure aims to close a long‑standing loophole and strengthen oversight of offshore wealth held by Chinese residents.