Dentons’ take: China’s new offshore trust tax rules - What families, trustees, private banks and wealth advisers should do now

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On 24 July 2026, China’s Ministry of Finance and State Taxation Administration issued Announcement No. 21 of 2026, setting out the substantive individual income tax rules for offshore trusts. On the same day, the State Taxation Administration issued Announcement No. 15 of 2026, which provides the filing, administration and enforcement framework for those rules. Together, the two announcements mark a significant development for China-linked offshore wealth structures.

The policy direction is clear. Offshore trusts are not being invalidated as succession or asset-holding vehicles, but the tax treatment of such structures is now being brought into a more explicit and administrable framework. For families, trustees, private banks, insurers and advisers, the question is no longer simply whether an offshore structure works under its governing trust law. The more immediate question is whether the structure can withstand tax reporting, valuation, liquidity, residency and succession scrutiny.

A useful way to understand the new regime is this: tax may now arise on the way in, while the trust is running, on the way out, and on key family events such as death or change of tax residence.

Announcement No. 21 is the substantive framework. It provides that an individual transferring property into an offshore trust, or deriving income through an offshore trust, is treated as obtaining income under the PRC Individual Income Tax Law and must declare and pay individual income tax. It defines offshore trusts broadly to include foreign-law trusts and other overseas legal arrangements with trust-like functions, while excluding certain regulated financial products issued by banks, insurers, securities firms, fund companies and similar institutions that meet specified regulatory, operational and risk-bearing conditions.

Announcement No. 15 is the administrative machinery. It tells taxpayers where to file, when to file, what forms and supporting documents must be submitted, what trustees must do, when instalment payment may be available, and how non-compliance may be penalised.

This is not only a tax-rate issue. It is also an information, governance, liquidity and trustee-readiness issue. For many families, the first challenge may not be calculating the tax, but producing the records needed to calculate it. We unpack each in turn in this article.

Announcement No. 21 provides that an individual transferring property into an offshore trust, or deriving income through an offshore trust, is treated as obtaining income under the PRC Individual Income Tax Law and must declare and pay individual income tax. The definition of “offshore trust” is broad. It includes foreign-law trusts and other overseas legal arrangements with trust-like functions, but excludes certain regulated financial products issued by banks, insurers, securities firms, fund companies and similar institutions that meet specified conditions.

For resident individuals, transferring property into an offshore trust is treated as a taxable transfer of property. The taxable income is calculated by reference to the market value of the property at the time of transfer, less its original value and reasonable expenses. After tax is paid, the property’s tax basis is stepped up to its market value at the time of transfer.

During the life of a resident individual offshore trust, income generated by the trust, and by overseas entities held, controlled or managed by the trust, is taxable annually to the resident individual whether or not the income is actually distributed. This is one of the most commercially significant parts of the regime because it limits the ability to use offshore trusts to defer tax by retaining income offshore.

Announcement No. 15 provides the practical mechanics. It identifies the competent tax authority, sets out filing timelines, prescribes the filing documents, imposes assistance obligations on trustees, provides a mechanism for instalment payment in specified cases, and confirms that non-compliance may be handled under the PRC Tax Collection and Administration Law.

Resident individuals must generally file between 1 March and 30 June of the following year for property transferred into an offshore trust and for income generated by the trust in the preceding year. Non-resident individuals must file within 15 days of the following month where they transfer property into an offshore trust and have China-sourced taxable income. Resident beneficiaries receiving distributions from non-resident-settled offshore trusts must file between 1 March and 30 June of the following year.

The administrative burden is substantial. Taxpayers may need to produce trust documents, property lists, organisational charts, trust financial statements, operating income records, distribution records, liquidation reports and Chinese translations of foreign-language materials. Trustees must assist with calculation, reporting and submission of information.

For ease of reference, Annex A sets out a summary table of the key filing timelines, income categories and required documentation under Announcement No. 15.

Chinese tax resident settlors who transferred property into offshore trusts.

Chinese tax resident beneficiaries receiving distributions from offshore trusts settled by non-residents.

Families with mixed resident and non-resident contributors to the same trust.

Offshore trustees administering trusts with China-linked settlors or beneficiaries.

Private banks, insurers, family offices and wealth advisers involved in offshore wealth structures.

Families with underlying offshore companies, SPVs, foundations or other entities held, controlled or managed by an offshore trust.

Individuals who have acquired foreign nationality or long-term or permanent residence abroad but whose primary economic interests remain in China.

The last category is especially important. Announcement No. 21 provides that an individual who has acquired foreign nationality or long-term or permanent residence abroad, but whose primary economic interests are derived from China, may still be determined as a resident individual with domicile. In practical terms, a second passport or foreign permanent residence is not, by itself, a tax plan.

Where a resident individual transfers property into an offshore trust, tax may arise on the gain at the point of transfer. The taxable amount is the market value of the property at transfer, less original value and reasonable expenses. This is a major issue for families who transferred appreciated shares, real estate or pre-IPO interests into offshore trusts. It may also create a liquidity mismatch: the tax may be triggered by a transfer into trust even where no cash has been realised.

Dentons’ Take: for many families, the hardest question may not be “what is the tax?” but “where does the cash come from?”

Income generated during the existence of a resident individual offshore trust is taxable annually to the resident individual, whether or not distributed. This includes income generated by overseas entities held, controlled or managed by the trust. Income must be classified as “income from transfer of property” or “interest, dividends and bonuses”.

The announcement also restricts deductions and offsets. Losses cannot be carried forward to subsequent years. The two categories of income cannot be offset against each other. Trustee remuneration, trust management fees, legal service fees and investment advisory fees are not deductible.

Dentons’ Take: this moves offshore trusts from a deferral conversation to an annual compliance conversation. Trustees and family offices will need systems capable of producing PRC tax-category information, not just conventional trust accounts.

For offshore trusts settled by non-resident individuals, distributions to resident individuals may be taxable to the resident beneficiary. The rules also deem certain benefits to resident individuals as distributions, including loans, guarantees, payment or reimbursement of expenses, free or below-market use of trust property, or the provision of benefits through third parties or related parties.

Dentons’ Take: advisers should now review not only formal distributions, but also lifestyle benefits, family loans, guarantees, expense payments and informal use of trust assets.

Upon termination of a resident individual offshore trust, the resident individual is taxed on the liquidation proceeds of the trust property under “interest, dividends and bonuses”. Income generated between 1 January of the termination year and the termination date must also be declared under the announcement.

Announcement No. 15 provides the filing mechanics for termination and liquidation reporting. In specified cases where payment is difficult, instalment payment over up to five years may be available if the required filing is made before the filing deadline.

Dentons’ Take: unwinding a trust may not eliminate the tax problem. It may crystallise it.

If a resident individual becomes a non-resident individual during the life of a resident individual offshore trust, the market value of the offshore trust property at the date of residence change, less original value, is treated as taxable income under “interest, dividends and bonuses”. Unpaid taxes for prior years and for the period from 1 January of the year of residence change to the date of change must also be declared and paid.

Dentons’ Take: migration planning must now be integrated with trust planning. A change of residence may itself become a tax event.

If a resident individual dies and the offshore trust is inherited by non-residents or has no inheritors, the trustee or its designated domestic institution must declare and pay tax on behalf of the deceased. If the trust is inherited by another resident individual, that other resident individual takes over the ongoing tax obligations under the announcement.

Dentons’ Take: this is no longer only a tax issue. It is a succession governance issue. Trustees should review whether their trust documents, reporting covenants, indemnities and information rights are sufficient for this new environment.

Announcement No. 21 provides a 90-day window for specified historical unpaid taxes to be declared and paid without overdue fines. This includes unpaid individual income tax arising from resident individuals transferring property into offshore trusts between 1 January 2023 and 31 December 2025, and unpaid individual income tax arising from non-resident individuals transferring property into offshore trusts between 1 January 2023 and the implementation date. It also addresses pre-2026 income generated during the existence of resident individual offshore trusts.

The 90-day period should not be described as an amnesty. It is better understood as a limited regularisation window. The tax itself remains payable. If the taxpayer does not comply within the window, late-payment surcharges and penalties may apply under the relevant tax collection rules.

Dentons’ Take: urgency should not lead to panic. Families should not decide to file, unwind, restructure or migrate without first understanding the structure, the assets, the tax residence position, the trust income history, the availability of records and the liquidity implications.

One of the most important practical questions is whether older trusts are affected. The establishment-stage tax treatment may differ for trusts that have been in operation for more than three years, but that does not mean pre-2023 trusts are outside the regime for all purposes. Ongoing income, distributions, deemed distributions, termination, death and change of residence may still require review.

Dentons’ Take: the right question is not “is the trust old?” The right question is “what event, what income, what taxpayer and what reporting obligation are we analysing?"

For private banks, trustees, insurers and family offices, the immediate challenge is client triage. The following questions should be asked now:

Who is the settlor, deemed contributor, beneficiary and controlling person?

Is any relevant individual a Chinese tax resident or potentially treated as resident by reason of domicile or primary economic interests?

What assets were transferred into trust, when, and at what value?

What is the original cost basis of those assets?

What income has been generated by the trust and underlying entities?

Were there any distributions or deemed benefits, including loans, guarantees, expense payments or use of trust property?

Can the trustee provide PRC tax-category information by tax year?

Are Chinese translations, financial statements, organisation charts and trust documents available?

Is there a 90-day regularisation issue?

Would restructuring, unwinding, retaining the trust, using insurance, or changing residence create further tax consequences?

On insurance and private placement life insurance, advisers should be careful. Announcement No. 21 excludes certain regulated financial products from the trust-like arrangement limb, but insurance should not be treated as a universal substitute for offshore trusts. The correct analysis will depend on the product, policyholder, funding source, control rights, investment risk, beneficiary arrangements and PRC tax characterisation.

Identify the settlor, deemed contributor, beneficiaries, trustee, protector, underlying entities and related parties. Confirm the tax residence and domicile position of each relevant individual. Map all trust assets, contribution dates, original values, market values, distributions and benefits.

Assess whether there are unpaid historical taxes within the 90-day window. Review whether the trustee and advisers can produce the forms, trust documents, asset lists, organisation charts, financial statements, income records, distribution records and Chinese translations required by Announcement No. 15. Consider whether tax payment creates a liquidity issue and whether instalment filing may be relevant in permitted cases.

Consider whether the trust should be retained, modified, unwound or supplemented by other structures. Consider the role of operating companies, holding entities, insurance policies, family governance arrangements and succession documents. Review trustee powers, information covenants, indemnities, confidentiality obligations and reporting protocols.

The new offshore trust tax rules do not mean that every offshore trust is ineffective or that every family must unwind its structure. They do mean that China-linked offshore wealth planning has entered a new phase.

The old planning question was often: can the structure hold assets offshore? The new planning question is: can the family explain the structure, report the income, fund the tax, manage the trustee obligations and still achieve succession, governance and asset protection objectives?

That is a very different conversation.

Dentons Rodyk is working with families, trustees, private banks, insurers, family offices and PRC tax advisers to review China-linked offshore wealth structures, assess historical and ongoing reporting exposure, manage the 90-day window, and consider future structuring options. Clients should seek advice early where structures involve Chinese resident settlors or beneficiaries, mixed-residence families, offshore holding entities, insurance wrappers, pre-IPO wealth, cross-border succession or a potential change of tax residence.

Kia Meng Loh, FCIArb, TEP Kia Meng Loh, FCIArb, TEP Chief Operating Officer and Senior Partner, SingaporeSingaporeD +65 6885 3888 Email me kiameng.loh@dentons.com

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kiameng.loh@dentons.com

Linda Bai Linda Bai Partner, SingaporeSingaporeD +65 6885 2773 Email me linda.bai@dentons.com

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linda.bai@dentons.com

Trusts, Estates and Wealth Preservation

Trusts, Estates and Wealth Preservation

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