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FinanceChina targets offshore trusts held by wealthy individuals with new tax rules
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China has announced new tax rules targeting offshore trusts held by wealthy individuals, effective immediately. The Ministry of Finance stated that personal income tax will be charged on gains in asset values—such as shares and real estate—when these assets are first placed into offshore trusts, and income generated by the trusts will be taxed annually. The move aims to close a tax avoidance loophole and ease fiscal pressures exacerbated by a prolonged housing market downturn and economic slowdown. A 90-day grace period is offered for voluntary compliance on assets transferred between 2023 and 2025. The overhaul is expected to significantly impact Hong Kong, which recently overtook Switzerland as the world's largest offshore wealth center, with hundreds of billions of dollars held there. The policy follows a recent National Audit Office report uncovering tax evasion at state-owned financial institutions.
Source report
Ellichipuram Umesh Tue, July 28, 2026 at 2:45 AM PDT | 2 min read
China is intensifying scrutiny of overseas assets held by its wealthiest families by imposing personal income tax on offshore trusts, according to a report by the South China Morning Post (SCMP).
The reform aims to close a long-exploited "loophole" used by the wealthy to avoid taxation and to ease fiscal pressures exacerbated by a prolonged downturn in domestic housing prices.
Enforcement Phase Underway
A recent statement from the Ministry of Finance confirmed that the broader crackdown has entered the enforcement phase. Key measures include:
- Immediate taxation on asset transfers: Personal income tax will be charged on gains in asset values—such as shares and real estate—when these assets are first placed into offshore trusts.
- Annual taxation on trust income: Income generated by the trusts will be taxed each year.
These changes represent a significant tightening of oversight on China's wealthiest individuals, the publication noted.
Implications for Hong Kong
The tax overhaul is expected to have major implications for Hong Kong, which has recently overtaken Switzerland as the world's largest centre for offshore wealth. An estimated hundreds of billions of US dollars are held in the city, supported by a strong rebound in the property market and higher spending on luxury goods.
Voluntary Compliance Period
To encourage voluntary compliance, the Ministry of Finance announced:
- Individuals who transferred assets into offshore trusts between 2023 and 2025 will have a 90-day period to declare these holdings to tax authorities and settle the tax due.
- For income generated by the trusts before 2026, owners may report and pay tax under a simplified structure during the same 90-day grace period.
Fiscal Pressures Driving Reform
The revamp of tax rules comes as both Beijing and local governments face increasing fiscal pressure due to slowing economic growth and a downturn in the housing sector. Last month, China's National Audit Office uncovered tax evasion and oversight failures at several state-owned financial institutions.
"China targets offshore trusts with new tax rules" was originally created and published by The Accountant, a GlobalData owned brand.
Source
Yahoo FinanceWestern
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China targets offshore trusts with new tax rules