On 24 July 2026, the Ministry of Finance and the State Taxation Administration jointly issued the Announcement on Individual Income Tax Policies for Offshore Trusts (MOF & STA Announcement No. 15 of 2026, the “Announcement”), effective from 1 January 2026. The Announcement clarifies that arrangements carried out through offshore trusts by Chinese tax residents — individuals who are liable to tax in China on their worldwide income under the Individual Income Tax Law of the PRC and its implementing regulations — are subject to a uniform individual income tax rate of 20%, and that no income reductions or tax concessions may be claimed.

In addition, individuals domiciled outside China who stay in China for 183 days or more in aggregate within a tax year also constitute Chinese tax residents, and their worldwide income — including income from offshore trusts — must be reported and taxed in China.

Background and Significance

In recent years, a growing number of Chinese families have established offshore trusts for succession planning, asset protection and cross-border tax arrangements, yet the individual income tax rules governing such structures long lacked systematic guidance. The Announcement, for the first time, comprehensively clarifies the tax treatment of every stage of an offshore trust, marking China’s entry into a new era of transparent and standardised tax supervision over cross-border wealth management, with far-reaching implications for Chinese families and Chinese families worldwide.

Twelve Situations Covered

  • Injection of assets by an individual into an offshore trust (cash, equity, real estate, financial assets and other property)
  • Income arising from the holding, management and disposal of trust property
  • Distributions of trust benefits to beneficiaries, in cash or in kind
  • Investment income earned during the term of the trust, such as interest, dividends, rent and capital gains
  • Distribution of residual assets and liquidation income upon termination of the trust
  • Termination of an offshore trust by an individual and recovery of trust property
  • Changes in the status of settlors, protectors or beneficiaries, or changes in tax residency status
  • Subsequent transfers, substitutions and transfers of beneficial interests in trust property
  • Arrangements whereby the settlor retains control over or economic interests in the trust property
  • Indirect holdings through multi-tier trust structures or intermediate holding entities
  • Cross-border payment arrangements between offshore trusts and onshore assets or onshore beneficiaries
  • Other offshore-trust-related situations prescribed by the MOF and the STA

Five Taxation Stages

Structured around the trust life cycle, the Announcement clarifies the tax treatment of five key stages: asset injection, ongoing operation of the trust, income distribution, termination and liquidation, and change of status or succession. The computation of taxable income, the timing of tax liability and the filing deadlines for each stage are specified, and taxpayers must complete self-filing accordingly.

Three Key Details

  • Uniform rate: qualifying offshore trust income is taxed at a flat individual income tax rate of 20%, not the progressive rates for comprehensive income
  • No concessions: no income reductions or tax reliefs may be claimed; concession-dependent structures are no longer viable
  • Full-cycle supervision: from injection and operation to distribution and liquidation, all stages fall within the filing scope, sharply raising cross-border transparency
Institute note: the new rules mean offshore trust arrangements of Chinese tax residents have entered an era of substantive taxation and full-cycle supervision. Families and their advisers should promptly review existing structures, ensure compliant filing and manage tax risks. The Institute will continue to track policy developments and provide timely analysis for members and the industry.
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