China's 20% Tax on Offshore Trusts, Explained

For years, many wealthy Chinese families placed company shares, property and portfolios into trusts set up under foreign law, in places such as Hong Kong, Singapore or the Cayman Islands. Whether China could tax them was unclear. On 24 July 2026 it became clear. China’s Ministry of Finance and State Taxation Administration issued Announcement No. 21 of 2026, and the tax administration added a procedural companion, Announcement No. 15. Both were published the same day.

The short version: putting assets into an offshore trust now counts as a taxable sale, the trust’s income is taxed every year in the hands of the Chinese resident who funded it, and older liabilities from 2023 onward must be declared and paid within 90 days. That window closes on 22 October 2026. The rules show how a home country can look straight through a trust. (For a refresher on trusts, see our guide to holding structures.)

What counts as an offshore trust

The announcement defines an offshore trust as a trust set up under foreign law, or any other arrangement that works like one. The function decides, not the label. Financial products sold to the public by regulated banks, insurers and fund managers are excluded.

When the 20% tax applies

The rate is 20%, China’s flat rate for gains on property and for interest and dividends under its individual income tax law. According to the announcement and summaries by KPMG China and law firm Morgan Lewis, it applies at several points:

1. Putting assets in. A resident who moves assets into an offshore trust is treated as if they had sold them at market value. The 20% applies to the gain, meaning market value minus original cost and reasonable expenses, not to the whole value.
2. While the trust exists. Income earned by the trust, and by certain offshore companies it controls (generally a stake of 25% or more, or control in practice), is attributed every year to the resident who funded it, whether or not anything is paid out. Companies with a real business and commercial purpose are left out. Trust management and advisory fees cannot be deducted.
3. Payouts. For trusts funded by non-residents, Chinese resident beneficiaries are taxed on what they receive. Loans, guarantees, paying someone’s personal bills, or free use of a trust’s house can all count as a payout.
4. Endings and departures. Tax is also due when a trust is wound up, and when a resident who funded a trust stops being a Chinese tax resident.

Look-through taxation, in plain English

“Look-through” means the tax office does not treat the trust as a separate taxpayer. It looks through it to the person behind it. In a classic trust, the settlor gives the assets away and the trustee holds them. China’s rules say: if a Chinese resident actually funded the trust, its income is still theirs for tax purposes. The test is who really contributed the assets, not whose name appears in the trust deed. Where both residents and non-residents contributed, the whole trust is treated as resident-funded.

A trust can separate ownership from benefit in law, but it cannot stop the country where you live from taxing you as if you still held the assets.

The 90-day window

Article 17 of the announcement gives 90 days from 24 July to declare and pay old tax without late-payment charges. KPMG China’s alert names the deadline: 22 October 2026. The window covers assets put into trusts by residents between 1 January 2023 and 31 December 2025, transfers by non-residents from 1 January 2023 to 24 July 2026, and trust income earned before 2026. It is not an amnesty: older periods are not automatically safe, and deliberate evasion can still bring penalties. As of 12 October 2026, we found no announcement of an extension.

Why illiquid assets are the hardest part

The tax is paid in cash, but much trust wealth sits in private company shares, pre-IPO stakes and property. These must be valued, often from old records, and the numbers must match what foreign banks have already reported to Beijing under the Common Reporting Standard. Reuters quoted a Hong Kong family office executive who said some wealthy people may need to borrow to pay. Lawyer Ryan Lin of Bayfront Law told CNBC that most of his clients planned to sell part of their portfolios, and expected listed shares, the easiest assets to sell, to be hit hardest. The rules allow payment in instalments only in narrow cases, such as a trust ending or a death, not for the 90-day catch-up.

A reported shift from Singapore to Hong Kong

Nikkei Asia reported on 7 October, as summarised by South Korea’s Seoul Economic Daily, that some Chinese wealth is moving from Singapore back to Hong Kong. Its reasons: the new rules have cast doubt on trusts abroad, and Singapore has tightened checks on the source of funds since a S$3 billion money-laundering case in 2023, which slows family office approvals. Hong Kong reports more than 3,380 single family offices at the end of 2025, per a Deloitte study for InvestHK. The two cities count family offices differently, so treat this as a reported trend, not a measured flow.

A fair caveat

We worked from the official text through translations and adviser summaries. Some terms, such as “reasonable expenses”, are not yet defined, and local tax offices may differ. Not everyone sees Hong Kong as the winner: Carlos Casanova, senior Asia economist at Union Bancaire Privée, told Reuters the measures could slow money flowing into Hong Kong and other Asian centres in the near term.

Five lessons to take away

1. A trust does not change where you live. Your home country can tax you as if the trust were not there.
2. Function beats form. China’s rules cover anything that works like a trust, whatever it is called.
3. Cash matters as much as the tax. A bill on illiquid assets can force sales at the wrong time.
4. Old records come back. Data already exchanged between countries can be used to check what you declare.
5. Moving the structure is not a plan. A new jurisdiction for the trust does not change the residence of the person who funded it.

Questions to bring to your advisors

Does anyone in our family count as a Chinese tax resident, and did they fund a trust or similar structure after 1 January 2023? How would its assets be valued, and where would the cash come from? Do our records match what banks have already reported? These are questions to bring to your lawyers and tax advisors, not advice.