China's window for wealthy residents to declare and pay a 20% income tax on offshore trusts without late fees closed on October 22, ending a three-month scramble that pushed some of the country's best-known founders to sell shares and borrow money to settle their bills.
The deadline marks a turning point for the structures Chinese entrepreneurs have long used to hold stakes in companies listed in Hong Kong and New York. For years, trusts and holding companies registered in places such as the British Virgin Islands and the Cayman Islands kept founders' personal fortunes at arm's length from mainland tax authorities. Beijing has now made clear it intends to look through them.
The State Taxation Administration has compiled lists of people likely to owe tax using the Hurun wealth rankings, corporate filings, and other public information, Reuters reported, while tax offices in wealthy provinces and cities have set up dedicated task forces to gather data on offshore trusts. "The net is very wide," said Wei Kang, a partner at law firm Charles Russell Speechlys who advises wealthy clients.
What Beijing's Announcement No. 21 Taxes
The rules are set out in Announcement No. 21 of 2026, issued jointly by the Ministry of Finance and the State Taxation Administration and dated July 24. They reach an offshore trust at three stages: when a Chinese tax resident moves assets into it, on the gain over the asset's original cost; every year the trust exists, on its income whether or not that income is paid out; and when it is wound up, on the liquidation proceeds. Under China's individual income tax law, each of these income categories is taxed at 20%.
The rules also reach backward. Residents must settle unpaid tax on assets placed into trusts from January 1, 2023, through December 31, 2025, and the announcement allows tax authorities to extend the look-back period for large amounts under China's tax collection law. Trust income earned before 2026 is to be reported as dividend income, regardless of its original type.
Taxpayers who declared and paid within 90 days of the announcement were spared late fees. After that, overdue tax incurs late payment charges, and cases treated as tax evasion face fines on top. Hong Kong newspaper The Standard put the surcharge at an annualized rate of about 18.25%.
The sums can be large. Oscar Liu, chief executive of wealth adviser JLT Legacy Group, told Reuters that the bill in a single case "could range from a few million yuan to hundreds of millions, or even billions."
Haidilao And Kanzhun Founders Raise Cash
The clearest signs of strain have appeared in Hong Kong's stock market. On September 8, SP NP, a controlling shareholder entity tied to a discretionary trust set up by Haidilao International co-founder Shu Ping, sold about 259 million shares in the hotpot chain, a 4.65% stake, for roughly HK$2.75 billion (about US$351 million). Haidilao's shares fell 9.1% the next day. Chinese financial outlet Caixin reported that the sale "may relate to" the new offshore trust tax.
On October 12, Haidilao announced it would lend its chairman and chief executive, Zhang Yong, who is Shu Ping's husband, up to 100 million yuan (about US$14 million) from internal resources for "personal financial arrangements." The unsecured loan runs for one month. Zhang and his family hold Singaporean citizenship, according to The Standard, but are still treated as Chinese tax residents because their core economic interests are on the mainland.
In September, Zhao Peng, chairman of Kanzhun, which operates the recruitment app Boss Zhipin, sold about US$110 million worth of shares through his holding company Techwolf in a Hong Kong block trade, according to a filing with the U.S. Securities and Exchange Commission. Bloomberg, citing people familiar with the matter, reported that the money was to pay the new tax. Kanzhun has not disclosed a reason for the sale.
Reuters also reported that private banks have been lending to clients against shares in their own companies to cover tax bills, and that losses from falling share prices cannot be offset against what is owed.
Eight Billionaires Hold $140 Billion Through Trusts
The exposure is greatest at the very top. Bloomberg identified eight Chinese billionaires among the world's 500 richest people who hold listed shares through offshore trusts, with combined assets of about US$140.2 billion. They include NetEase founder William Ding, with about US$37 billion, and PDD Holdings founder Colin Huang, with about US$29 billion.
The others named were Xiaomi's Lei Jun, Hansoh Pharmaceutical's Zhong Huijuan, China Hongqiao's Zhang Bo, Pop Mart's Wang Ning, SITC International's Yang Shaopeng, and Anta Sports' Ding Shizhong. A China Hongqiao spokesperson called linking the company's founder and management to the tax change unfounded and misleading.
Across the wider economy, Boston Consulting Group estimates China's offshore wealth at about US$1.7 trillion, Reuters reported. Founders who sold shares through trusts at peak valuations between 2014 and 2020 are among the most exposed. "The tax policy adjustment impacts established trust funds more severely," said Kevin Woo, a partner at law firm Ince & Co.
Foreign Passports Offer Little Shelter
Some families have looked for a way out: winding up trusts, shutting newly created ones before funding them, or giving up mainland residency. The new rules narrow those options. Article 11 of the announcement states that "an individual who has obtained foreign nationality or long-term or permanent residency abroad, but whose principal economic interests derive from within China, may be determined to be a resident individual with domicile." The announcement also contains separate provisions for residents who become nonresidents.
"There's no running away from this, no way to restructure," Ryan Lin, a Singapore-based lawyer, told Reuters in August. Wei Kang of Charles Russell Speechlys cautioned that "the devil is in the detail," pointing to uncertainty over how the principal economic interest test will be applied in practice.
A Revenue Hunt Shaped By The Property Slump
The campaign builds on years of tightening scrutiny. China implemented the Common Reporting Standard, a global framework under which tax authorities exchange financial account data, in 2017, giving Beijing a clearer view of money held abroad. Tax offices in Beijing and Hangzhou have separately begun collecting income tax on returns from offshore insurance policies.
The fiscal backdrop matters too. China's property market has been under pressure since 2021, eroding the land sale revenue that local governments depend on and pushing them to look for steadier sources of income. "The enforcement campaign is unprecedented and appears here to stay," Christopher Beddor of research firm Gavekal Dragonomics told Reuters.
Offshore trusts remain a legal tool for succession planning, risk management, and cross-border investment. What has changed is Beijing's insistence that the income they generate be declared at home. For Hong Kong and Singapore, which compete to manage Chinese family fortunes, that shifts the selling point away from capital mobility and favorable tax treatment and toward helping clients stay compliant across overlapping tax regimes.
As the grace period for China's offshore trust tax expires, the episode is less about one levy than about Beijing redrawing the line between private wealth and the state's claim on it.
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