Individual income tax / Offshore trusts / MOF and STA Announcement No. 21 of 2026 / STA Announcement No. 15 of 2026 / July 24, 2026

This article is based on the official texts publicly available as of July 30, 2026. The tax treatment of a particular trust must still be assessed in light of the trust documents, the nature of the assets, the taxpayer’s status, and the requirements of the competent tax authority. This article does not constitute tax advice for any particular structure.

Official documents:

• MOF and STA Announcement on Individual Income Tax Matters Concerning Offshore Trusts (Announcement No. 21 of 2026)
• STA Announcement on the Administration of Individual Income Tax Concerning Offshore Trusts (Announcement No. 15 of 2026)
• Official interpretation of Announcement No. 15 of 2026

Key Takeaways

On July 24, 2026, the Ministry of Finance and the State Taxation Administration issued the Announcement on Individual Income Tax Matters Concerning Offshore Trusts (MOF and STA Announcement No. 21 of 2026, “Announcement No. 21”). On the same day, the STA issued the supporting Announcement on the Administration of Individual Income Tax Concerning Offshore Trusts (STA Announcement No. 15 of 2026, “Announcement No. 15”). Both announcements took effect on the date of publication and establish a dedicated framework for the taxation and administration of individual income tax involving offshore trusts.

Announcement No. 21 does not deny the legitimate value of offshore trusts. Its central change is to make clear that contributing property to an offshore trust and receiving income through an offshore trust are income tax events subject to filing and payment under the announcement. Arrangements that use an offshore trust to avoid Chinese individual income tax will face substantive review and continuing compliance obligations.

I. A Shift from Unclear Rules to Standardized Administration

For a long time, China lacked a systematic set of special tax rules addressing offshore trusts. In practice, uncertainty existed over the attribution of trust income, the identity of the taxpayer, and the timing of taxable events. Some high-net-worth individuals used offshore structures in jurisdictions such as the British Virgin Islands and the Cayman Islands and attempted to reduce their Chinese tax obligations through formal arrangements or gaps between different rules.

Announcements No. 21 and No. 15 establish a relatively complete framework covering scope, asset contributions, ongoing income, termination and liquidation, competent tax authorities, filing documents, and filing deadlines. For the wealth-management industry, the rules send at least three clear signals:

1. Offshore trusts may still serve legitimate wealth-transfer and asset-isolation purposes, but their tax consequences cannot be ignored;
2. Interposing offshore companies, partnerships, foundations, or other entities will not by itself prevent substantive tax analysis; and
3. Both existing and newly established offshore trusts should be brought into an ongoing system of tax filings, document retention, and compliance management.

II. Substance over Form: Coverage of Trust-Function Arrangements

The policy adopts a broad definition of offshore trusts and determines tax attribution by examining actual contribution, economic burden, control, receipt, use, and disposition of property.

1. What arrangements are covered?

Article 1 of Announcement No. 21 covers trusts established under foreign law and other foreign-law arrangements that are not called trusts but substantively perform similar trust functions. Financial products issued by licensed banks, insurance companies, securities companies, funds, and similar institutions are excluded where the institutions are regulated by the relevant financial authorities, independently conduct business for unspecified customers, and bear the relevant risks.

2. The look-through rules

Under Article 2, a person contributes property to an offshore trust when the person:

• transfers property to an offshore trust or trustee to hold, manage, use, or dispose of it;
• transfers property to an offshore entity held, controlled, or managed by the offshore trust or trustee; or
• transfers property through another person or organization while continuing to actually fund, bear the economic burden of, or control the property.

This means that a structure such as a “BVI holding company plus offshore trust” cannot rely solely on corporate layers to block tax analysis. If property contributed by a nonresident is actually controlled by a resident individual, the contribution is treated as a contribution by the resident. If an offshore trust funded by a nonresident distributes income to a resident, or the income is actually received, used, controlled, or disposed of by a resident, that resident may bear the filing and payment obligation.

3. Quantitative standards for foreign entities and control

Articles 13 and 14 provide operational standards. A foreign entity generally means a company, partnership, foundation, or other organization established under foreign law that meets at least one of the following conditions: passive or low-risk income—such as dividends, interest, rent, royalties, property-transfer income, or low-risk trade and service income—accounts for at least 50% of total profits in the preceding tax year; its employees, registered business address, or financial accounting do not meet substantive-operation requirements; its funds pay an individual’s consumption or property expenses unrelated to business operations; or its business decisions are not actually made by the organization.

Licensed financial institutions that are regulated, serve unspecified customers independently, and bear business risks are excluded. Other organizations may also qualify for the exception if they can prove a reasonable commercial purpose and substantive business operations. A taxpayer claiming an exception must provide supporting evidence to the tax authority.

Control includes directly or indirectly holding, in aggregate, at least 25% of the equity, voting rights, interests, income rights, or similar rights in a foreign entity or organization. It also includes substantive control over funding, operations, purchasing and sales, or distributions. For multi-tier indirect ownership, the percentages are multiplied; an intermediate holding exceeding 50% is treated as 100%.

III. Three Principal Taxable Events

Announcement No. 21 allocates the individual income tax obligations relating to offshore trusts across the principal stages of contribution, ongoing income, and termination and liquidation. The relevant income is reported under categories such as “income from property transfer” or “interest, dividend, and bonus income,” with the precise tax calculation depending on the Individual Income Tax Law, the announcement, and the facts of the case.

1. Contribution of property: a resident’s contribution creates a filing obligation

When a resident individual contributes property to an offshore trust, the taxable income is the market value of the property at the time of contribution less the original value and reasonable expenses. The amount is reported as income from property transfer. After the tax is filed and paid, the tax basis of the property is adjusted to its market value at the time of contribution.

A nonresident individual contributing property to an offshore trust is treated as transferring property and reports income from property transfer sourced in China. If the property contributed by the nonresident is actually controlled by a resident individual, the contribution is treated as a contribution by that resident.

This is one of the most significant changes: contributing property to an offshore trust is no longer only a trust-law delivery event; it may also create an individual income tax filing obligation. For existing structures, practitioners should re-check the date of contribution, historical cost, market value, reasonable expenses, and prior filings.

2. Ongoing income: actual distribution is not always decisive

During the life of an offshore trust funded by a resident individual, income generated by the trust and by foreign entities held, controlled, or managed by the trust is attributed to the resident individual for tax purposes, whether or not the income is actually distributed. The income is reported annually as income from property transfer or interest, dividend, and bonus income. Trust income that has already been reported and taxed under the rules is not taxed again when actually distributed.

Income from property transfer is calculated as the balance of property-transfer proceeds for the tax year after deducting the original value and reasonable expenses. Losses cannot be carried forward to offset later years. Interest, dividend, and bonus income is calculated separately, and the two categories cannot offset each other. Trustee remuneration, trust-management fees, legal fees, investment-advisory fees, and other expenses incurred during establishment or operation cannot be deducted from taxable income.

Even where no cash is distributed, the rules treat certain benefits as deemed distributions. Examples include using trust property to secure or fund a resident’s debt, paying or reimbursing a resident’s expenses, allowing a resident to use trust property for free or at a clearly low price, or providing economic benefits through a third party. The deemed distribution is measured by the market value of the property, expense, amount discharged, or other economic benefit actually received, used, or enjoyed.

3. Termination and liquidation: liquidation income is handled separately

When a resident individual’s offshore trust terminates, the resident is the taxpayer. The liquidation income of all offshore trust property is reported as interest, dividend, and bonus income. Liquidation income means the market value of the trust property at termination less its original value and reasonable expenses.

Operating income generated from January 1 of the termination year through the termination date remains subject to the ongoing-income rules. Special rules also apply where a resident individual becomes a nonresident, or where a deceased resident’s trust is inherited by a nonresident or is not inherited. The announcement allocates filing responsibilities among the taxpayer, trustee, and designated domestic institution in these situations.

Valuation, tax-basis calculation, deemed distributions, and deemed transfers should be handled by reference to the full text of the announcements, the supporting administrative rules, and the requirements of the competent tax authority. They should not be calculated solely from the trust instrument or the offshore trustee’s accounts.

IV. The Existing-Structure Transition Window

For tax that was payable but not paid before the announcements took effect, Article 17 of Announcement No. 21 provides a transitional filing arrangement. It is not a general exemption for all historical tax; rather, it allows specified categories of unpaid tax from specified periods to be reported and paid within 90 days of implementation without additional late-payment charges.

1. Existing unpaid tax on contributions

The transition covers:

• individual income tax payable but unpaid where a resident contributed property to an offshore trust between January 1, 2023 and December 31, 2025; and
• individual income tax payable but unpaid where a nonresident contributed property to an offshore trust between January 1, 2023 and the implementation date of Announcement No. 21.

Where the unpaid tax amount is substantial, the tax authority may extend the collection period under the Tax Collection and Administration Law. The three-year reference should not be understood to mean that every historical arrangement is automatically free from collection; the amount, filing history, and applicable collection rules still matter.

2. Existing unpaid tax on ongoing income

For income generated during the life of a resident individual’s offshore trust before January 1, 2026, the resident reports the income without distinguishing categories and pays under “interest, dividend, and bonus income” within 90 days of implementation, without additional late-payment charges. The same transition applies to income distributed to a resident from an offshore trust funded by a nonresident.

Counting 90 days from July 24, 2026 places the transition window approximately in late October 2026. The actual filing deadline should be confirmed with the competent tax authority and its filing system. If the tax is not paid on time, the tax authority will handle the matter under the Tax Collection and Administration Law and may add late-payment charges; where the conduct constitutes tax evasion, tax, late-payment charges, and penalties may also be imposed.

V. Administrative Details Under Announcement No. 15

Announcement No. 15 addresses practical questions such as where to file, what to submit, when to file, and how to retain supporting documents.

1. Competent tax authority

The competent authority is generally the tax authority at the place where the principal domestic operating enterprise related to the property contributed to the offshore trust is registered. If there is no relevant domestic operating enterprise, the competent authority is the tax authority where the taxpayer’s domestic property is located or where the taxpayer usually resides. If the taxpayer disputes the allocation, the tax authorities may determine the competent authority.

2. Filing forms and supporting documents

For a resident individual, the main filing is the Annual Individual Income Tax Self-Filing Return (Form B), accompanied by the Offshore Trust Individual Income Tax Detail Schedule, the Offshore Trust Individual Income Tax Annual Report, financial statements of the trust, and information on operating income and distributions. A nonresident individual files the Individual Income Tax Self-Filing Return (Form A) together with the relevant offshore trust forms.

The first filing must also include:

1. the offshore trust agreement or an equivalent document;
2. a detailed list of property contributed to the offshore trust;
3. information on the offshore trust’s organizational structure; and
4. other relevant offshore trust information.

Termination and liquidation, a resident becoming a nonresident, and a resident’s death followed by nonresident succession or no succession are subject to the corresponding liquidation forms and reports. Where a taxpayer has difficulty paying the tax, an eligible resident or trustee may file the required record-filing form before the filing period ends and pay the tax in equal installments over five years.

For property contributed before the announcements were issued, the first filing after implementation must also include information for the year in which the trust was established, the 2025 Offshore Trust Individual Income Tax Annual Report, and historical financial statements. Trust instruments, delivery records, valuation materials, financial statements, distribution records, and tax payment documents should form a traceable document chain.

3. Filing deadlines

• Contribution of property: a resident files from March 1 through June 30 of the year following the contribution; a nonresident files by the 15th day of the month following the contribution;
• Ongoing income: a resident files from March 1 through June 30 each year for the preceding year’s income; where an offshore trust funded by a nonresident distributes income to a resident, the resident files from March 1 through June 30 of the year following receipt;
• Termination and liquidation: filing is due by the 15th day of the month following completion of liquidation. If liquidation is not completed within 60 days from termination, the 60th day is treated as the completion date;
• Becoming a nonresident or succession after death: filing is due by the 15th day of the month following the relevant event; and
• Installment payment: the installment record-filing must be submitted before the filing period ends. Eligible taxpayers may pay in equal installments over five years.

4. Foreign tax credits

Where a resident individual has paid individual-income-tax-type tax overseas under the local law in relation to an offshore trust, the amount may be credited against the current Chinese tax payable if it satisfies the requirements of Chinese tax law. The taxpayer should claim the credit in the foreign-income filing and provide the relevant tax certificates and supporting documents.

VI. Interaction with the General Tax Framework

Announcement No. 21 is a special rule for individual income tax involving offshore trusts, but it does not operate independently of the existing tax system. At least the following issues require attention:

1. Tax residence. Obtaining foreign nationality or long-term or permanent residence abroad does not automatically exclude resident status. An individual whose principal economic interests arise in China may still be treated as a resident individual with a domicile in China, subject to the Individual Income Tax Law and the facts.
2. Cross-border information transparency. Mechanisms such as CRS can increase the likelihood that information on offshore accounts, trusts, and financial assets will be linked to domestic tax administration.
3. Foreign economic-substance rules. Economic-substance requirements in jurisdictions such as the British Virgin Islands and the Cayman Islands may affect the establishment, operation, and continued compliance of foreign entities. Meeting a local economic-substance requirement does not by itself eliminate Chinese individual income tax obligations.
4. Anti-avoidance rules. Where a taxpayer cannot provide truthful and complete information proving a reasonable commercial purpose and compliance with the arm’s-length principle, the tax authority may adjust the taxable result using a reasonable method. Structures lacking commercial substance or deliberately designed to avoid tax may also implicate the general anti-avoidance rules and other applicable regimes.

VII. Key Risks and Compliance Recommendations

1. Recurring risk areas

Existing structures. Contributions between 2023 and 2025 that were not properly taxed, and historical income from 2025 and earlier years that was not taxed, should be checked promptly against the scope of Article 17.

Indirect structures. Offshore companies, partnerships, foundations, and other intermediaries cannot by themselves prevent tax analysis of the underlying funding, economic burden, and control relationships.

Competent-authority risk. The competent tax authority may differ from the authority where the individual usually completes an annual comprehensive-income reconciliation. The taxpayer should confirm the responsible authority and filing requirements before filing.

Document-retention risk. Incomplete annual reports, financial statements, valuations, structure documents, distribution records, or tax certificates may affect filing, foreign tax credits, and subsequent explanations to the tax authority.

Overlapping cross-border obligations. Structures involving U.S. beneficiaries, cross-border assets, or multiple tax residences require a coordinated review of FATCA, CRS, foreign tax credits, and the regulatory requirements of the relevant jurisdictions.

2. Recommended compliance steps

Create an inventory of existing structures. Review the trust establishment, asset contributions, ongoing income, distributions, and termination and liquidation, including the assets, documents, valuations, income, and prior filings at each stage.

Use the 90-day window carefully. Determine whether unpaid contribution tax from 2023 to 2025 and unpaid historical income from 2025 and earlier fall within the transition arrangement. Once the facts and filing position are complete, proceed with filing promptly.

Reassess indirect structures. Use the trust-function test, the 25% control threshold, and the foreign-entity criteria to review multi-tier offshore structures and distinguish legitimate commercial arrangements from arrangements that lack substance.

Confirm the competent authority in advance. Based on the domestic operating enterprise related to the contributed property, the location of domestic property, or the taxpayer’s usual residence, confirm the filing channel, forms, and supporting documents with the competent tax authority.

Build an annual compliance process. Make annual income calculations, valuations, distribution records, financial archiving, and tax filings part of a fixed process rather than reconstructing the basic documents every year.

Coordinate across jurisdictions. Review foreign economic-substance requirements, cross-border information reporting, local taxes, and foreign tax credits together with the Chinese filing to avoid a single-point compliance blind spot.

Conclusion: Offshore Trusts Enter a More Detailed Compliance Era

Announcements No. 21 and No. 15 move individual income tax administration for offshore trusts toward clearer rules, more specific documentation, and more defined filing events. The policy does not deny the lawful functions of offshore trusts in wealth transfer, asset isolation, and cross-border asset management. It does, however, make it unsuitable to present an offshore structure simply as a tool for avoiding Chinese individual income tax.

Going forward, the value of wealth-management professionals will lie less in creating regulatory blind spots and more in designing structures that withstand substantive review while addressing the taxpayer’s status, the nature of the assets, the commercial purpose, and the rules of each relevant jurisdiction. For existing offshore trust holders, the immediate priorities are to map the facts, calculate the tax position, complete the document set, communicate with the competent tax authority, and use the 90-day transition arrangement carefully where it applies.