What’s New with Offshore Trust Reporting
China’s fiscal authorities have rolled out 公告2026年第21号/第15号, which establishes new rules for how residents should handle taxes related to 离岸信托 (offshore trusts) (zhejiang.chinatax.gov.cn). Under it:
- Individuals (居民个人) who transfer assets into offshore trusts and the gains from those assets during trust existence must declare and pay 个人所得税 (individual income tax), regardless of whether benefits are distributed. (zhejiang.chinatax.gov.cn)
- Non-residents are required to report, particularly where their offshore trust income includes Chinese-source transfer gains. (fgk.chinatax.gov.cn)
- Affected individuals must also file annual reports and furnish trust financial statements to the tax authority. (fgk.chinatax.gov.cn)
Implications for Individuals Using Offshore Trusts
Tax Home: China-based Residents
If you’re a Chinese resident and you’ve placed property or assets into an offshore trust:
- The transfer itself may be subject to capital gains (财产转让所得) taxation at the point of transfer. (zhejiang.chinatax.gov.cn)
- While the trust is operating, any income (interest, dividends, rent, etc.) generated whether paid out or not must be included in your tax base annually. (zhejiang.chinatax.gov.cn)
- Upon termination of the trust, liquidation gains equal to market value minus cost are taxable. (zhejiang.chinatax.gov.cn)
Non-residents and Mixed Structures
Even if you're not a full-time resident, if you OBTAIN trust income from Chinese sources or control offshore entities via a trust, you may have reporting obligations and tax liabilities. Be aware of ASE portion vs. ownership tracing. (zhejiang.chinatax.gov.cn)
Action Steps: Compliance and Planning Advice
- Track asset bases carefully — calculating gains depends on knowing your cost basis and establishing market value at transfer.
- Maintain clear documentation: trust deeds, beneficiary agreements, financial statements, expense invoices (legal, trustee, auditing) — note: many expenses are not deductible from tax base. (zhejiang.chinatax.gov.cn)
- Timely reporting: For resident individuals, report for the prior tax year between March 1 and June 30; for non-residents, within the month following the transfer. (zhejiang.chinatax.gov.cn)
- If you already have assets in offshore trusts, perform a retroactive review and prepare to report from 2026-01-01 onward. Penalties for omission or late reporting may apply.
Example Case
Li Wei, a resident of Beijing, transferred a small real-estate holding in Thailand into an offshore trust on June 1, 2026, valued at RMB ¥1 million with acquisition cost of RMB ¥600,000. By July, the trust earns dividends of RMB ¥50,000. Under the new rules, Li Wei must:
- Report the transfer by the period March–June 2027, pay tax on the RMB ¥400,000 gain as 财产转让所得;
- Include the RMB ¥50,000 in his individual tax return under 利息、股息、红利所得, even if not distributed;
- If later the trust distributes assets or ends, report and pay corresponding gains or income.
Key Takeaways
- The concept of “离岸信托” is under tighter control — ignore ambiguity and assume a broad definition.
- Earnings—distributed or not—are taxable for Chinese resident individuals.
- Acting now, ensuring documentation and valuation, can significantly reduce risks down the road.
Stay updated — rules may evolve with further international tax treaties and enforcement practices.