Greater China Financials: Offshore trusts in focus: strengthening tax enforcement

Research evidence excerpt

Greater China Financials: Offshore trusts in focus: strengthening tax enforcement

27 July 2026

Equities

Financials Greater China Financials

Offshore trusts in focus: strengthening tax enforcement Greater China

◆ The MOF and the State Taxation Administration will levy Gary Lam*, CFA

individual income tax on offshore trusts Head of Greater China Financials Research

The Hongkong and Shanghai Banking Corporation Limited

gary.lam@hsbc.com.hk

◆ We read this as an initiative to reduce regulatory arbitrage +852 2996 6926

Joanna Chan*, CFA

◆ These dynamics may favour CMB-A/H, HKEX (all Buy). The Analyst, Asia Financials and Fintech

market may also prefer state-owned banks for defensiveness Thejoanna.ct.chan@hsbc.com.hkHongkong and Shanghai Banking Corporation Limited

+852 2288 4826

What’s new: The MOF and the State Taxation Administration jointly announced that Simon Ling*

offshore trusts for individuals will be subject to income tax, effective 24 July, with a Associate

Guangzhou

90-day grace period. This announcement marks another significant move by Beijing

to tighten oversight of offshore wealth structures used by Chinese tax residents.

* Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is

not registered/ qualified pursuant to FINRA regulations

A tax framework targeting offshore trusts: A 20% individual income tax rate

already applies under the Individual Income Tax Law for property-transfer and

dividends/interest income. The announcement clarifies the taxation framework for

offshore trusts, confirming that the settlor is the taxpayer throughout the trust’s life

cycle - from initial contribution, income generation, to termination. It also explicitly

targets shell entities and arrangements that provide indirect benefits (e.g. guarantees

or expense payments).