Chinese authorities have introduced a series of measures that expand the tax net over offshore wealth held by mainland residents and foreign‑national individuals, prompting wealthy families to reassess cross‑border residence and mobility plans.
New tax rules on offshore trusts
- Announcement No. 21 of 2026 (issued July 24, 2026 by the Ministry of Finance and the State Taxation Administration) treats the transfer of assets into an offshore trust as a taxable disposal.
- Individual income tax is levied at 20 % on the gain between the original cost and the market value on the contribution date.
- Trust income is attributed to the resident contributor each year, regardless of distribution.
- A “look‑through” rule extends tax liability to underlying offshore companies controlled by the trust (defined as ≥ 25 % ownership or substantive influence over capital, operations, or distributions).
- Regulated financial institutions and entities with a demonstrable operating business are exempt.
- A 90‑day filing window (ending 22 Oct 2026) allows settlement of historic liabilities without late‑payment surcharges.
Dividend taxation for foreign‑invested enterprises
- Announcement No. 27 (effective 1 Sep 2026) repeals the 1994 exemption that let foreign individuals receive dividends from foreign‑invested enterprises in China tax‑free.
- Dividends are now subject to a standard 20 % individual income tax, withheld at source, with no transitional period.
- The change primarily affects founders who own mainland operating companies through foreign nationality or offshore holding structures—a common arrangement for families based in Hong Kong.
Outbound investment regulations
- State Council Order No. 837 (Regulations on Outbound Investment, effective 1 Jul 2026) now lists resident individuals as investors alongside enterprises.
- Detailed rules for individuals remain draft. The National Development and Reform Commission (NDRC) released a revised Administrative Measures for Outbound Investment for public comment on 21 Aug 2026, with a 20 Sep 2026 deadline. The draft would extend the corporate filing and annual‑reporting framework (in place since 2018) to individuals.
Context and enforcement
- China has been receiving financial‑account data under the Common Reporting Standard (CRS) since 2018. The OECD reported exchange of information on 123 million accounts holding €12 trillion in 2022.
- In January 2026 the State Taxation Administration reminded residents to review overseas income for 2022‑2024 and correct any omissions, indicating active data matching.
Impact on tax residence
- Obtaining a residence permit or a second passport does not automatically change tax residence. Tax residency is determined by where a person lives and where their principal economic interests lie, according to Chinese tax law and treaty tie‑breakers.
- Announcement No. 21 explicitly states that acquiring foreign nationality or permanent residence does not end Chinese tax residence if the individual’s economic centre remains in China.
Family response and mobility planning
- Wealthy families that have been considering residence options are accelerating their decisions. The October 22, 2026 filing deadline and school‑admission timelines are driving earlier action.
- Chinese nationals continue to dominate Residence‑by‑Investment (RBI) programmes. In Greece, 21 393 investor permits were active in January 2026, with 10 272 (48 %) held by Chinese nationals.
- Hong Kong’s New Capital Investment Entrant Scheme (New CIES) recorded 3 166 applications as of 28 Feb 2026, representing roughly HK$95 billion (US$12.2 billion) in anticipated investment, with 1 762 approvals already granted.
Residence permits versus citizenship‑by‑investment
- A citizenship‑by‑investment (CBI) passport provides mobility and contingency benefits but does not affect tax residence.
- A residence permit, when integrated into a genuine relocation plan, can shift the centre of economic life and therefore alter tax residency.
- Announcement No. 21 also prices the transition: if a resident who funded an offshore trust later becomes a non‑resident, a deemed disposal of the trust property is triggered, requiring tax modelling before the move.
Importance of early planning
- RBI programmes can change rapidly:
- Spain’s golden‑visa programme closed April 2025.
- Portugal removed its real‑estate route in 2023.
- Greece raised its main property threshold to €800 000 in high‑demand areas in 2024.
- Early mobility planning expands the menu of jurisdictions, clarifies timelines, and gives tax and legal advisers time to coordinate with residence applications rather than reacting to deadlines.
Advisory landscape
- Tax advisers assess the fiscal consequences of any change in residence or structure.
- Lawyers handle disclosure, compliance, and the new trust and dividend filing requirements.
- Wealth advisers evaluate existing structures and investments.
- Specialized residence‑advisory firms map jurisdiction‑specific eligibility, due‑diligence requirements, and implementation timing, ensuring that residence options are realistic and align with the family’s broader tax and legal plan.
Practical next step: families with cross‑border assets should evaluate residence options before regulatory deadlines force a rushed decision, allowing sufficient time for coordinated tax, legal, and wealth‑management planning.
Source article: www.imidaily.com
