Two departments: Individuals who place their assets into offshore trusts and gain income through offshore trusts shall declare and pay personal income tax as required.

On July 24th, the Ministry of Finance and the State Administration of Taxation issued the "Announcement on Relevant Matters of Offshore Trust Individual Income Tax". It proposes that individuals who place assets in offshore trusts and earn income through offshore trusts shall be regarded as obtaining income as defined in Article 2 of the "Individual Income Tax Law of the People's Republic of China" and shall declare and pay individual income tax in accordance with the provisions of this announcement. For resident individuals who place assets in offshore trusts, the taxable income shall be the balance after deducting the market value at the time of placing the assets from the original value of the assets and reasonable expenses, and they shall declare and pay individual income tax as "income from asset transfers". After resident individuals declare and pay individual income tax according to the previous paragraph, the original value of the assets shall be adjusted to the market value at the time of placement. The full text is as follows: Announcement on Individual Income Tax Matters of Offshore Trusts by the Ministry of Finance and the State Administration of Taxation Ministry of Finance, State Administration of Taxation Announcement No. 21 of 2026 In order to strengthen the administration of individual income tax on offshore trusts, according to the relevant provisions of the "Individual Income Tax Law of the People's Republic of China" and its implementation regulations, the following is announced on the relevant matters of individual income tax on offshore trusts: 1. Individuals who place assets in offshore trusts and earn income through offshore trusts shall be regarded as obtaining income as defined in Article 2 of the "Individual Income Tax Law of the People's Republic of China" and shall declare and pay individual income tax in accordance with the provisions of this announcement. "Offshore trust" as referred to in this announcement refers to a trust established in accordance with foreign laws or other legal arrangements with trust functions. Other legal arrangements with trust functions refer to overseas legal arrangements that do not establish trusts by name but essentially have similar trust functions, excluding financial products issued by banks, insurance companies, securities companies, fund companies, etc., regulated by financial regulatory authorities of the country and regions in which they are located, which carry out independent business for unspecified customers and assume risks. 2. Individuals who place assets in offshore trusts as referred to in this announcement include the following situations: (1) Individuals transfer assets to offshore trusts or offshore trust trustees for holding, managing, using, or disposing of; (2) Individuals transfer assets to offshore trusts or offshore trust trustees for holding, controlling, managing, or disposing of overseas entities. Individuals who transfer assets through other individuals or organizations, and the assets are actually contributed, borne, or controlled by the individual, are regarded as obtaining and placing assets. Assets referred to in this announcement include movable property, immovable property, and other types of assets. "Trustee" as referred to in this announcement refers to an organization or individual responsible for holding, managing, using, or disposing of trust assets according to the trust agreement and legal provisions. 3. For resident individuals who place assets in offshore trusts, the taxable income shall be the balance after deducting the market value at the time of placing the assets from the original value of the assets and reasonable expenses, and they shall declare and pay individual income tax as "income from asset transfers". After resident individuals declare and pay individual income tax according to the previous paragraph, the original value of the assets shall be adjusted to the market value at the time of placement. 4. For offshore trusts established by resident individuals and the overseas entities held, controlled, and managed by the trust during the existence period that generate income, regardless of whether it is actually distributed, shall be the taxpayers as the resident individuals, and they shall declare and pay individual income tax annually as "income from asset transfers" or "interest, dividend, and bonus income". Resident individuals who have declared and paid individual income tax on trust income as required are no longer required to declare and pay individual income tax when the income is actually distributed. The taxable income of "income from asset transfers" shall be calculated as the balance after deducting the income from asset transfers in a tax year from the original value of the assets and reasonable expenses, and the loss amount shall not be carried forward to offset in subsequent years. The taxable income of "interest, dividend, and bonus income" shall be calculated as the total of various incomes other than income from asset transfers obtained in a tax year. The taxable income of "income from asset transfers" and "interest, dividend, and bonus income" cannot offset each other. The trustee remuneration, trust management fee, legal service fee, investment advisory fee, and other expenses incurred during the establishment and existence of offshore trusts cannot be deducted from the taxable income. If resident individuals place assets in offshore trusts and transfer trust assets by way of distribution, gift, transfer, or low-price transfer, the taxable income of "income from asset transfers" shall be determined as the balance after deducting the market value at the time of transfer from the original value of the assets and reasonable expenses. Losses incurred from transferring assets to related parties of offshore trusts cannot be deducted from the taxable income of "income from asset transfers". 5. When a resident individual offshore trust terminates, the taxable income shall be the liquidation income of all offshore trust assets, and the individual shall declare and pay individual income tax as "interest, dividend, and bonus income". The liquidation income of the trust assets shall be the balance after deducting the market value at the time of trust termination from the original value of the trust assets and reasonable expenses. For the income generated by the resident individual offshore trust from January 1st of the termination year to the trust termination date, the resident individual shall declare and pay individual income tax according to the provisions of Article 4 of this announcement. 6. During the existence of the resident individual offshore trust, if the resident individual becomes a non-resident individual, the individual income tax shall be calculated as the balance after deducting the market value of the trust assets at the time of becoming a non-resident individual from the original value, and the individual shall declare and pay individual income tax as "interest, dividend, and bonus income". Any individual income tax that was due but not paid from January 1st to the date of becoming a non-resident individual, as well as any individual income tax due and unpaid in previous years, shall be declared and paid by the individual according to the provisions of this announcement. After declaring and paying individual income tax as required, the original value of the trust assets shall be adjusted to the market value at the time of becoming a non-resident individual. Subsequent actions shall be carried out according to the provisions of Article 8 of this announcement. 7. During the existence of the resident individual offshore trust, if the resident individual dies and the offshore trust is inherited by another non-resident individual or remains without an heir, the taxable income shall be determined as the balance after deducting the market value of the trust assets at the time of death from the original value, and the trustee or the designated domestic institution shall declare and pay individual income tax on behalf of the individual as "interest, dividend, and bonus income". Any individual income tax that was due but not paid from January 1st to the date of death, as well as any individual income tax due and unpaid in previous years, shall be declared and paid by the trustee or the designated domestic institution according to the provisions of this announcement. After declaring and paying individual income tax as required, the original value of the trust assets shall be adjusted to the market value at the time of death of the resident individual, and subsequent actions shall be carried out according to the provisions of Article 8 of this announcement. If the offshore trust is inherited by another resident individual after the resident individual dies, it shall be regarded as a resident individual offshore trust, and the other resident individual shall declare and pay individual income tax according to the provisions of this announcement. The term "inheritance" as referred to in this announcement means that after an individual places assets in an offshore trust, another individual takes over the relevant rights and interests of the individual in the offshore trust. 8. When a non-resident individual places assets in an offshore trust, it is treated as transferring assets personally. For income derived from sources within China, the taxable income shall be the balance after deducting the market value at the time of placing the assets from the original value and reasonable expenses, and the individual shall declare and pay individual income tax as "income from asset transfers". If the non-resident individual's assets placed in an offshore trust are actually controlled by a resident individual, it shall be treated as the resident individual placing assets in an offshore trust, and the individual shall declare and pay individual income tax according to this announcement. If the offshore trust that a non-resident individual places assets in distributes income to a resident individual during its existence, the resident individual shall declare and pay individual income tax as "interest, dividend, and bonus income". If the offshore trust that a non-resident individual places assets in distributes income to a non-resident individual, but the income is actually received, used, controlled, or disposed of by another resident individual, it shall be regarded as the offshore trust distributing income to that resident individual, and the resident individual shall declare and pay individual income tax according to the previous paragraph. When the offshore trust terminates, and a resident individual acquires trust assets, the taxable income shall be the market value at the time of trust termination, and the individual shall declare and pay individual income tax as "interest, dividend, and bonus income". If the offshore trust, after a non-resident individual places assets in it, is later inherited by a resident individual, the resident individual shall declare and pay individual income tax according to the provisions of Articles 4 to 7 of this announcement. 9. If two or more resident individuals place assets in the same offshore trust, the trust assets and income attributed to each individual shall be divided in proportion to the market value of the offshore trust assets at the time of placement by each individual, and each individual shall declare and pay individual income tax separately according to the provisions of this announcement. If a resident individual and a non-resident individual place assets in the same offshore trust, it shall be treated as all assets were placed in the offshore trust by the resident individual, and the individual shall declare and pay individual income tax according to the provisions of this announcement. 10. When a resident individual declares and pays individual income tax according to the provisions of this announcement, any personal income tax of a similar nature paid by the offshore trust on income earned abroad in accordance with local laws shall be offset against the tax payable for the current period in accordance with the law. 11. A person who acquires foreign citizenship, long-term or permanent residency abroad, but whose main economic interests are derived from within China, may be determined as a resident individual with a place of residence. 12. If a non-resident individual who places assets in an offshore trust exhibits the following behaviors, it shall be deemed as distributing income to related resident individuals, and the resident individual shall declare and pay individual income tax according to this announcement: (1) Providing mortgage, guarantee, or borrowing for resident individuals' debts directly or indirectly with trust assets, and not resolving or repaying them before December 31st of the same year; (2) Reimbursing or paying expenses for resident individuals, allowing them to use trust assets for free or at a significantly lower price; (3) Transferring assets or paying expenses to resident individuals, or providing other economic benefits through third parties; (4) Providing economic benefits to related parties of resident individuals, organizations controlled by or benefiting residents. The amount deemed to be distributed as income shall be determined based on the actual value of the assets, expenses, amounts compensated, or other economic benefits received, used, or enjoyed by the resident individuals. 13. The term "overseas entity" as referred to in this announcement refers to various organizations established in accordance with foreign laws, such as companies, partnerships, foundations, etc., which meet one of the following conditions: (1) Dividends, bonuses, interest, rents, royalties, gains from property transfers, and non-operative or less risk-bearing trading and service income in the previous tax year accounted for more than 50% of the total profits; (2) The number of employees, registered business address, financial accounting, etc., do not meet substantive operational conditions; (3) The organization's funds are used for personal expenditure unrelated to enterprise production and operation; (4) Decisions on production and operation are not actually made by the organization. Licensed financial institutions such as banks, insurance companies, securities companies, etc., which conduct independent business for unspecified customers, assume risks, and are regulated by the financial regulatory authorities of the country and regions in which they are located, as well as other organizations that can prove to have reasonable commercial purposes and engage in substantive business activities, are not considered "overseas entities" as referred to in this announcement. Taxpayers claiming to apply the exceptions described in the previous article shall provide relevant certification materials to the tax authorities. 14. The term "control of overseas entity or organization" as referred to in this announcement includes the following situations: (1) Directly or indirectly holding 25% or more of the equity, voting rights, shares, rights to income, or similar rights of the overseas entity or organization, the percentage of multiple indirect holdings shall be calculated by multiplying each layer's holding percentage, and if the percentage held by the intermediate layer exceeds 50%, it shall be calculated as 100%; (2) Exerting substantial control over the overseas entity or organization in terms of capital, operations, purchase and sale, distribution, etc. 15. When a resident individual places assets in an offshore trust, they shall file a tax return with the tax authorities between March 1st and June 30th of the following year. If non-resident individuals who have placed assets in offshore trusts need to pay tax, they shall file a tax return with the tax authorities within 15 days of the following month. During the existence of the offshore trust, resident individuals shall file a tax return with the tax authorities between March 1st and June 30th each year for the tax payable in the previous year. When the offshore trust terminates, taxpayers shall file a tax return with the tax authorities within 15 days of the next month after the completion of the liquidation. If the offshore trust fails to complete the liquidation within 60 days from the termination date, the 60th day from the date of termination shall be deemed as the completion of the liquidation. If there is difficulty in paying taxes on time, with the approval of the tax authorities, the tax payment can be evenly distributed in installments over a period of 5 years. For deceased resident individuals, the trustee or the designated domestic institution shall file a tax return with the tax authorities within 15 days of the next month after the death of the individual. If there is difficulty in paying taxes on time, with the approval of the tax authorities, the tax payment can be evenly distributed in installments over a period of 5 years. 16. If taxpayers cannot provide the value of assets or the provided value is unreasonable, the tax authorities may request a government price cost and certification organization to evaluate the value of the assets. 17. Resident individuals who place assets in offshore trusts between January 1st, 2023, and December 31st, 2025, and who have unpaid individual income taxes, as well as non-resident individuals who place assets in offshore trusts between January 1st, 2023, and the date of implementation of this announcement, shall declare and pay the due but unpaid individual income taxes within 90 days from the date of implementation of this announcement, without any late payment fines. If the amount of due but unpaid individual income tax is significant, the tax authorities may extend the recovery period according to the "Tax Collection Management Law of the People's Republic of China". Until January 1st, 2026, the income generated during the existence of the resident individual offshore trust shall not differentiate between income categories, and the resident individual shall declare and pay individual income tax within 90 days from the date of implementation of this announcement as "interest, dividend, and bonus income". For the income distributed from the offshore trust to resident individuals during the existence period, the resident individual shall declare and pay individual income tax within 90 days from the date of implementation of this announcement, without late payment fines. For taxpayers who fail to pay the individual income tax as mentioned above within the specified period, the tax authorities shall handle it according to the "Tax Collection Management Law of the People's Republic of China" and shall impose late payment fines. If it is deemed as tax evasion, the tax authorities shall recover the taxes and fines not paid or underpaid and impose penalties according to the "Tax Collection Management Law of the People's Republic of China". Starting from January 1st, 2026, resident individuals who place assets in offshore trusts and earn income during the existence of the offshore trust shall declare and pay individual income tax according to the provisions of this announcement. 18. This announcement shall be effective from the date of issuance. Announced by the Ministry of Finance and the State Administration of Taxation July 24, 2026 This article is selected from the official website of the Ministry of Finance, translated by GMTEight, edited by Feng Qiuyi.