Two departments: Individuals who load assets into offshore trusts and obtain income through offshore trusts should file and pay personal income tax in accordance with regulations

The Zhitong Finance App learned that on July 24, the Ministry of Finance and the State Administration of Taxation issued a “Notice Concerning Matters Relating to Personal Income Tax on Offshore Trusts”. Among them, it is proposed that individuals load assets into an offshore trust and obtain income through an offshore trust are income obtained as stipulated in Section 2 of the “Personal Income Tax Law of the People's Republic of China”, and that they should declare and pay personal income tax in accordance with the provisions of this Notice. Individual residents load their assets into offshore trusts, use the market value when the assets are loaded, the balance after deducting the original value of the property and reasonable expenses as taxable income, and pay personal income tax according to the “income from the transfer of property” declaration. After individual residents declare and pay personal income tax in accordance with the provisions of the preceding paragraph, the original value of the property is adjusted to the market value at the time of installation.

The original text is as follows:

Notice of the Ministry of Finance and the State Administration of Taxation on matters relating to personal income tax on offshore trusts

Ministry of Finance and State Administration of Taxation Notice 2026 No. 21

In order to strengthen the collection and administration of personal income tax on offshore trusts, in accordance with the relevant provisions of the “Personal Income Tax Law of the People's Republic of China” and its implementing regulations, the following matters relating to offshore trust personal income tax are announced:

1. Individuals incorporating assets into offshore trusts and obtaining income through offshore trusts are income obtained as stipulated in Article 2 of the “Personal Income Tax Law of the People's Republic of China”, and they shall declare and pay personal income tax in accordance with the provisions of this Notice.

Offshore trusts referred to in this notice refer to trusts established in accordance with foreign laws or other legal arrangements with fiduciary functions. Other legal arrangements with a trust function refer to foreign legal arrangements that are not established under the name of a trust and essentially have similar trust functions, except for financial products issued by banks, insurance companies, securities companies, fund companies, etc. that independently conduct business and bear risks to unspecified customers and are subject to supervision by financial supervisory authorities in the country or region where they are located.

2. The individuals mentioned in this notice have placed assets into offshore trusts, including the following situations:

(1) Individuals transfer assets to offshore trusts or offshore trust trustees to hold, manage, use, and dispose of;

(2) Individuals transfer assets to offshore trusts or foreign entities held, controlled, and managed by offshore trust trustees to hold, manage, and dispose of.

If an individual transfers property through another individual or organization, and the property is actually funded, borne, or controlled by that individual, the individual is deemed to have acquired and incorporated into the property.

The property referred to in this notice includes movable property, real estate property and other types of property. The trustee referred to in this notice refers to an organization or individual responsible for holding, managing, using, and disposing of trust assets in accordance with trust agreements and legal provisions.

3. Individual residents load their assets into offshore trusts, use the market value when the assets are loaded, the balance after deducting the original value of the property and reasonable expenses as taxable income, and pay personal income tax in accordance with the “income from property transfer” declaration.

After individual residents declare and pay personal income tax in accordance with the provisions of the preceding paragraph, the original value of the property is adjusted to the market value at the time of installation.

4. Offshore trusts (hereinafter referred to as individual residents' offshore trusts) and foreign entities owned, controlled, and managed by the offshore trust during the period of existence, whether actually distributed or not, use the individual resident as the taxpayer and file personal income tax on an annual basis according to “income from property transfer” or “income from interest, dividends, and dividends”. Individual residents have already declared trust income for personal income tax according to regulations, and will no longer declare and pay personal income tax at the time of actual distribution.

The taxable income of “income from the transfer of property” is calculated on the balance of the income from the transfer of property within a tax year after deducting the original value of the property and reasonable expenses, and the loss amount cannot be carried over and deducted from the following year. The taxable income of “income from interest, dividends, and dividends” is calculated on the basis of all types of income other than income from property transfers obtained within a tax year. “Income from transfer of property” and “income from interest, dividends, and dividends” shall not be deducted from each other. Various expenses such as trustee remuneration, trust management fees, legal service fees, and investment advisory fees incurred during the establishment and operation of an offshore trust shall not be deducted from taxable income.

Where an offshore trust of an individual resident and an overseas entity holding, controlling, or managing the offshore trust transfers trust assets by means of allocation, gift, transfer, low price transfer, etc., the taxable income of “property transfer income” shall be determined based on the balance of the asset's market value after deducting the original value of the property and reasonable expenses. Losses resulting from the transfer of property to an offshore trust related party shall not be deducted from the taxable income of “income from the transfer of property”.

5. When an offshore trust of an individual resident is terminated, the individual resident is the taxpayer, the liquidation proceeds of all offshore trust assets are used as taxable income, and personal income tax is declared and paid in accordance with the “income from interest, dividends, and dividends”. The liquidation income of a trust asset is the balance of the market value of the trust asset at the time of termination of the trust after deducting the original value and reasonable expenses.

Individual residents shall file and pay personal income tax on income generated from January 1 of the year of termination to the date of termination of the offshore trust in accordance with the provisions of Article 4 of this Notice.

6. During the existence of an individual resident's offshore trust, where an individual resident becomes a non-resident individual, the balance after deducting the original value from the market value of the offshore trust property converted to a non-resident individual is taxable income. The individual resident shall file and pay personal income tax according to “interest, dividends, and dividend income income”; to a non-resident individual during the period from January 1 of the year until the date of conversion to a non-resident individual and for the previous year, the individual resident shall file and pay in accordance with the provisions of this Notice.

After filing and paying the personal income tax of the previous payment, the original value of offshore trust assets was adjusted to the market value of non-resident individuals on the same day. It will then be implemented in accordance with the provisions of Article 8 of this Notice.

7. During the existence of an individual resident offshore trust, after the death of an individual resident, if the offshore trust is inherited by another non-resident individual or no one, the balance after deducting the original value from the market value of the trust property on the day of death is taxable income. The trustee or its designated domestic institution shall declare and pay personal income tax on behalf of the trustee or its designated domestic institution in accordance with “interest, dividends, and dividend income”; the personal income tax unpaid by the individual resident during the period from January 1 of the year of death to the date of death and the previous year shall be declared and paid on behalf of the trustee or its designated domestic institution in accordance with these regulations.

After filing and payment of the personal income tax of the preceding amount, the original value of offshore trust assets is adjusted to the market value on the day of the individual residents' death, which will then be implemented in accordance with the provisions of Article 8 of this Notice.

If an individual resident succeeds an offshore trust after the death of an individual resident, it is considered an individual resident offshore trust, and the other individual resident shall file and pay personal income tax in accordance with the provisions of this Notice.

Succession referred to in this notice means that after an individual loads assets into an offshore trust, another individual undertakes the individual's rights relating to the offshore trust.

8. Non-resident individuals load assets into offshore trusts, treating them as individual transfers of property. The balance obtained from domestic sources of “property transfer income” is taxable income from the market value of the property after deducting the original value of the property and reasonable expenses, and is declared and paid personal income tax according to the “income from the transfer of property”. If a non-resident individual loads property into an offshore trust and is actually controlled by an individual resident, it is deemed that an individual resident has placed the property into an offshore trust and paid personal income tax in accordance with this notice.

Offshore trusts with non-resident individuals as assets are distributed to individual residents during the period of existence. The individual resident is the taxpayer and pays personal income tax according to the “income from interest, dividends, and dividends”.

An offshore trust in which a non-resident individual is incorporated into the property distributes income to a non-resident individual, but if another individual resident actually obtains, uses, controls, and disposes, it is deemed that the offshore trust distributes the income to that individual resident, and the individual resident shall file and pay personal income tax in accordance with the provisions of the preceding paragraph.

When an offshore trust with non-resident individuals as assets is terminated, individual residents acquire trust assets using the market value at the time of termination of the trust as taxable income and file and pay personal income tax in accordance with “income from interest, dividends, and dividends”.

If a non-resident individual loads assets into an offshore trust and the offshore trust is inherited by an individual resident, the individual resident shall file and pay personal income tax in accordance with the provisions of Articles 4 to 7 of this Notice.

9. When two or more individual residents load their assets into the same offshore trust, the trust property and income belonging to each individual shall be divided according to the ratio of the market value of the offshore trust assets to the market value of all offshore trust assets at the time of the individual's entry, and they shall separately file and pay personal income tax in accordance with the provisions of this Notice.

When a resident individual and a non-resident individual load assets into the same offshore trust, it is deemed that all individual residents load their assets into an offshore trust and file and pay personal income tax in accordance with the provisions of this Notice.

10. When individual residents declare and pay personal income tax in accordance with the provisions of this Notice, taxes of the nature of personal income tax paid overseas by the offshore trust in accordance with local law are deducted from the current tax payable amount according to law.

11. Individuals who have obtained foreign nationality or long-term or permanent residency abroad, but whose main financial benefits come from within China, can be judged as individual residents with domicile.

12. An offshore trust in which a non-resident individual has incorporated the following circumstances shall be deemed to distribute income to related resident individuals. The individual resident shall declare and pay personal income tax in accordance with the provisions of this Notice:

(1) Trust assets are used directly or indirectly to provide collateral, guarantee, or loans to individual residents' debts, and have not been discharged or returned before December 31 of the current year;

(2) Pay or reimburse expenses on behalf of individual residents, or allow them to use trust assets free of charge or at obviously low prices;

(3) Transferring property, paying expenses, and providing other financial benefits to individual residents through third parties;

(4) Providing the above financial benefits to related parties of individual residents and organizations controlled or actually benefiting from the individual resident.

The amount of proceeds deemed to be distributed is determined according to the market value of property, expenses, reimbursed amounts, or other economic benefits actually obtained, used, or enjoyed.

13. Foreign entities referred to in this notice refer to various types of organizations such as companies, partnerships, foundations, etc. established in accordance with foreign laws and meet one of the following conditions:

(1) Dividends, dividends, interest, rent, royalties, property transfers, and income from trade and services that do not bear or are less likely to bear operating risks in the previous tax year account for at least 50% of the total profit;

(2) The number of employees, registered business address, financial accounting, etc. do not meet the substantive operating conditions;

(3) Organizational funds are personal payments for consumer expenses and property expenses unrelated to the production and operation of the enterprise;

(4) Decisions on production and operation are not actually made by the organization.

Licensed financial institutions such as banks, insurance companies, securities companies, etc. that independently conduct business and bear risks for unspecified customers, and other organizations that can prove that they have reasonable commercial purposes and engage in substantive business activities are not foreign entities referred to in this notice.

Where a taxpayer claims to apply the exceptions in the preceding paragraph, the taxpayer shall provide relevant supporting documents to the tax authority.

14. Controlling an overseas entity or organization referred to in this notice includes the following circumstances:

(1) Direct or indirect holdings of more than 25% of the shares, voting rights, shares, revenue rights, or similar rights of an overseas entity or organization are directly or indirectly. The multi-tier indirect holding ratio is calculated by multiplying the ownership ratio of each tier; if the middle tier holds more than 50%, it is calculated as 100%;

(2) Substantial control over an overseas entity or organization in terms of capital, operation, purchase and sale, distribution, etc.

15. Individual residents who load their assets into an offshore trust shall file a tax return with the tax authorities within March 1 to June 30 of the year following the year they are loaded into the property. Non-resident individuals who load assets into an offshore trust and are required to pay taxes should file a tax return with the tax authorities within the 15th of the following month.

During the existence of an offshore trust, individual residents should file tax returns with the tax authorities for the previous year from March 1 to June 30 of each year.

If an offshore trust is terminated, the taxpayer shall file a tax return with the tax authority within 15 days of the month following the completion of the liquidation. If the liquidation of an offshore trust is not completed within 60 days from the date of termination, the 60th day from the date of termination of the trust is deemed the date of completion of the liquidation. If you are unable to pay your taxes on time due to difficulties, you can pay your taxes in equal installments within 5 years after filing with the tax authority.

In the event of the death of an individual resident, the trustee or its designated domestic agency shall file a tax return with the tax authority within 15 days of the month following the date of death of the individual resident. If you are unable to pay your taxes on time due to difficulties, you can pay your taxes in equal installments within 5 years after filing with the tax authority.

If an individual resident becomes a non-resident individual, the individual resident shall file a tax return with the tax authority within 15 days of the month following the date of conversion to a non-resident individual.

When processing tax returns, taxpayers shall submit tax returns and other tax-related information required by the tax authorities in accordance with the requirements of the tax authorities. If an individual is unable to provide true and complete information to prove that the transaction has a reasonable commercial purpose and conforms to the principle of independent transactions, the tax authorities may make adjustments in accordance with reasonable methods.

16. If the taxpayer is unable to provide the value of the property or the value of the property provided is unreasonable, the tax authority may refer the government price cost and certification agency to assess the value of the property.

17. During the period from January 1, 2023 to December 31, 2025, unpaid personal income tax due from incorporating assets into offshore trusts, and unpaid personal income tax due from non-resident individuals incorporating assets into offshore trusts during the period from January 1, 2023 to the date of implementation of this notice, they shall file and pay within 90 days from the date of implementation of this notice, with no late fees. Where a large amount of unpaid personal income tax is payable, the tax authority may extend the recovery period in accordance with the provisions of the “Tax Collection Administration Law of the People's Republic of China”.

Prior to January 1, 2026, income generated during the existence of an offshore trust by individual residents, regardless of income items, according to “income from interest, dividends, and dividends”, declared and paid personal income tax within 90 days from the date of implementation of this notice, with no late fees; income distributed to individual residents during the period of existence of offshore trusts with non-residents as assets, individual residents declared and paid personal income tax within 90 days from the date of implementation of this notice, with no late fees.

If a taxpayer fails to pay the above personal income tax after the due date, the tax authorities will deal with it in accordance with the provisions of the “Tax Collection Administration Law of the People's Republic of China” and add late fees. Where it is tax evasion, the tax authority shall recover unpaid or underpaid taxes or late payments and impose a fine in accordance with the provisions of the “Tax Collection Administration Law of the People's Republic of China”.

Starting January 1, 2026, individual residents will load assets into offshore trusts and income generated during the existence of offshore trusts, and file and pay personal income tax in accordance with the provisions of this notice.

18. This notice takes effect from the date of publication.

We hereby announce it.

Ministry of Finance and General Administration of Taxation

July 24, 2026

This article was selected from the “Ministry of Finance” official website, Zhitong Finance Editor: Feng Qiuyi.