Authorities in China have introduced new regulations and enforcement measures targeting offshore wealth held by mainland residents, including a 20% tax on offshore trusts. The rules, overhauled in late July, apply to the appreciation of assets such as shares and property at the time they are transferred into these trusts, as well as an annual 20% tax on trust income. Tax offices in cities including Beijing and Hangzhou have also begun enforcing taxation on returns from offshore insurance policies.
Historically, offshore trusts used by Chinese citizens operated in a regulatory grey area without a standardized tax regime. These structures became popular as mainland companies listed in Hong Kong, allowing founders to park wealth in dollar-denominated assets. According to a BCG report cited by Reuters, ultra-high-net-worth individuals in China hold up to $1.2 trillion in capital in jurisdictions such as Hong Kong and Singapore, while KPMG data indicates more than half of China’s super-rich utilize offshore family trusts.
Under the new requirements, individuals must report unpaid taxes on assets placed in trusts since January 2023 and on income received before 2026 within a 90-day window. Legal advisers report that some clients are now considering dismantling their trusts or liquidating mainland A-shares to raise cash for tax obligations. Others are reportedly seeking loans to pay bills because their wealth is held in illiquid assets like real estate. The enforcement is supported by the Common Reporting Standard and the Golden Tax Phase Four system, which allow authorities to cross-check financial data across jurisdictions.
Mainland residents and founders of overseas-listed companies will notice a concrete change in their financial planning and liquidity requirements. Because much of this wealth is tied up in illiquid assets like real estate or company shares, individuals may be forced to sell mainland stocks or borrow money to meet tax deadlines. A person who moved assets into a trust in 2023 now faces a 90-day deadline to report and settle unpaid taxes, creating an immediate demand for cash.
The knock-on effects could alter the landscape of Asian wealth centers. Carlos Casanova of UBP noted that these dynamics may slow capital flows into Hong Kong and other regional hubs. Furthermore, the move sets a precedent for broader tax reforms as provincial governments seek new revenue sources amid a property market downturn. Investors now face the prospect of expanded enforcement into overseas employment income and a closer look at how capital was originally moved out of mainland China. The immediate next step for affected individuals is the 90-day reporting deadline for assets held since 2023.