Beijing is targeting Chinese-owned assets held in offshore trusts with the introduction of a new tax that is expected to have significant implication for wealth hubs, most notably Hong Kong.
China will impose a personal income tax on offshore trusts, finance ministry and state tax administration said in a joint statement. The new rules include a 20% tax on the value appreciation of assets, including shares or properties, at the time of transfer into offshore trusts. Income from such trusts will also be taxed annually at 20%.
Individuals who become foreign citizens or permanent residents abroad, but retain their main economic interests in China may still be treated as Chinese tax residents.
Those who transferred assets into offshore trusts between 2023 and 2025 will be given a 90-day window to declare and settle without being fined for late payments. Taxes on trust income generated before 2026 could be reported and paid as interest, dividend, and bonus income during the 90-day grace period.
The new tax rules could have significant implications for financial centres, especially Hong Kong which recently surpassed Switzerland as the world’s largest offshore wealth hub. According to a BCG report, Hong Kong was home to USD2.9 trillion in cross-border wealth, of which 59% originated from mainland China. By 2030, offshore wealth in Hong Kong is expected to reach USD4.6 trillion, with the mainland accounting for 68%.
