How China’s Offshore Trust Taxation Is Reshaping Asian Family Offices

Tax Residency, Effective Control, and Liquidity Management in Hong Kong and Singapore

As of August 2026

On July 24, 2026, the Ministry of Finance of China and the State Taxation Administration of China (STA) issued Announcement No. 21 of 2026, clarifying the individual income tax treatment of offshore trusts, with effect from the same day. The Announcement did not create a new tax category or a new 20% tax rate applying only to offshore trusts. Rather, based on the existing Individual Income Tax Law and its implementing regulations, it clarified the tax treatment at each stage of an offshore trust, including the contribution of property, attribution of income during the trust term, a change from Chinese tax resident to Chinese tax non-resident status, termination of the trust, death, and succession.

Under the framework, when a Chinese tax resident contributes property to an offshore trust, the market value at the time of contribution less the cost basis and reasonable expenses is taxable as income from the transfer of property. During the trust term, income arising in a trust funded by a Chinese tax resident, and in certain overseas entities held, controlled, or managed by the trust, is attributed to the Chinese tax resident and reported annually according to the nature of the income, regardless of whether it is actually distributed. The annual tax base is not the mark-to-market amount of all unrealized gains on the assets held, but income arising during the year, such as income from the transfer of property and income from interest and dividends. By contrast, at taxable events such as a contribution, a change to Chinese tax non-resident status, termination of the trust, or certain deaths, unrealized appreciation may become taxable by reference to market value.

Income from the transfer of property and income from interest, dividends, and distributions are subject to a proportional 20% rate under China's Individual Income Tax Law. Trustee fees, trust administration fees, legal service fees, investment advisory fees, and similar expenses are not deductible from taxable trust income under the Announcement. Transitional relief applies to certain unpaid tax on contributions made since 2023 and to certain trust income arising before January 1, 2026: no late-payment surcharge will be imposed if the relevant return and payment are made within 90 days after the effective date, making October 22, 2026 the practical deadline. In certain cases where payment is difficult upon termination of a trust or the death of a Chinese tax resident, equal installment payments over a maximum of five years are permitted upon filing a notification.

The Announcement is not relevant only to high-net-worth individuals in Mainland China. Family office tax schemes and trust frameworks in Hong Kong and Singapore continue to operate in their respective jurisdictions, while China separately asks who qualifies as a Chinese tax resident and who exercises effective control over a trust or its underlying companies. Trustees, family offices, private banks, and others managing assets for Chinese families may therefore need to review, on an integrated basis, family members' tax residency, the Substance of trust-owned companies, consistency with Common Reporting Standard (CRS) and Know Your Customer (KYC) information, asset valuations, prior-year records, and tax liquidity.