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China cracks down on offshore trusts with new tax rules for the wealthy
Beijing’s new tax rules aim to close loopholes and boost fiscal revenue amid slowing economic growth and rising fiscal burdens
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Zhang Shidongin Shanghai
China will impose personal-income taxes on offshore trusts owned by wealthy individuals, plugging a loophole leveraged by rich mainland families to avoid taxation.
Effective immediately, the tax will be levied on gains made from asset values, such as stocks and properties, after having initially been put into trusts, the Ministry of Finance said in a statement on Friday. Incomes generated from the trusts will be taxed annually, it added.
These sweeping changes to the taxation rules mark a tightening by Beijing in its oversight of the massive wealth that the nation’s richest people have transferred overseas. Overseas trusts, often created in Hong Kong, are one of the most popular vehicles rich mainland-based families use to skirt regulatory surveillance and avoid taxation.
An inheritance dispute within the family of the late Zong Qinghou, the billionaire founder of Chinese soft-drink giant Wahaha Group who died in 2024, shed light on the wealth tycoons transferred to their overseas accounts. In the court case, Zong’s three children born out of wedlock sought to freeze an offshore trust worth billions of US dollars at their half-sibling’s disposal.
Beijing began targeting offshore trusts from at least 2025, but Friday’s finance ministry statement marked an official enforcement of the crackdown.
The overhaul’s implications will be far-reaching for Hong Kong, which recently overtook Switzerland as the world’s biggest hub for offshore wealth. It is estimated that hundreds of billions of US dollars are stockpiled in the city, buoyed by a strong recovery in the property market and increased spending on luxury goods.
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