China Warns of "Severe" Punishment for Offshore Trust Tax Evasion as Income-Tax Revenue Jumps 90%

Chinese authorities warned of "severe" punishment for people who use offshore trusts to evade tax, and personal income tax revenue rose 90%, the Financial Times reported, as scrutiny of the country's wealthiest residents tightens. A report carried by Tencent News (in Chinese) said cumulative declarations of income tax on offshore trusts have passed 160 billion yuan and drove a rise of nearly 90% in October's personal income tax receipts.

The legal basis is a joint notice from the Ministry of Finance and the State Taxation Administration published on July 24. Under the rules, assets that resident individuals place into offshore trusts, and income those trusts earn, have been taxable from January 1, 2026. The ministry's official explanation (in Chinese) applies a look-through test: assets placed into a trust by another person or entity but actually funded, held or controlled by the individual count as that individual's own. The ministry also said that intermediaries in China and abroad had induced taxpayers to hide assets in offshore trusts, and that tax authorities will "deal severely" with intermediaries and individuals who help others evade tax. Bloomberg reported that trust gains are taxable even when they are not distributed.

Enforcement began before the October surge. The State Taxation Administration said residents paid about 13 billion yuan in back taxes on overseas income in the first five months of 2026, and local bureaus in Shanghai, Jiangsu and Shenzhen have asked trust owners for detailed financial disclosures, according to the Bloomberg reporting. China receives account data from other jurisdictions under the Common Reporting Standard (CRS), the international framework for automatic exchange of financial-account information. That system gives the tax authority visibility into offshore holdings that trusts once obscured.