Chinese taxpayers have declared more than 160 billion yuan ($23.8 billion) in back taxes on offshore trust income since July, China’s State Taxation Administration told state-run Xinhua News Agency on Nov. 11.
More than 120 billion yuan (about $18 billion) of that was collected in October alone, the agency said. The payments helped drive a nearly 90 percent year-on-year jump in China’s individual income tax revenue for the month.
The tax targets offshore trusts that wealthy Chinese families have long used to hold company shares, property, and other assets in Hong Kong, Singapore, the Cayman Islands, and the British Virgin Islands.
It’s one of several steps the Chinese Communist Party (CCP) has taken this year to tighten control over private wealth, alongside new exit checks that analysts say fall hardest on people with savings, debts, or family abroad.
China-based industry insiders told The Epoch Times in July that the tax reflects mounting fiscal pressure on local governments, which have long paid their bills by selling land-use rights.
Those sales brought in 4.15 trillion yuan in 2025, less than half the 2021 total, a drop of more than 4 trillion yuan (more than $600 billion). So far this year, they have fallen by more than a quarter.
A CCP insider told The Epoch Times earlier this year that local governments were leaning more on tax inspections, back-tax collections, penalties, and asset confiscations to make up the shortfall.
Audits Ahead
The 90-day grace period ended on Oct. 22. Under rules the Finance Ministry and the tax agency issued on July 24, taxpayers who filed and paid within that window avoided late fees.
An official with the agency’s income tax department told Xinhua that people who filed inaccurate returns, or still haven’t filed, will now be pressed to pay and charged late fees. Those who keep refusing will face formal tax audits, and the most egregious cases will be made public, the official said.
The agency will also investigate intermediaries and individuals who encouraged or helped taxpayers dodge the tax and may name them publicly, the official added.
How the Tax Works
Under the rules, Chinese residents owe tax when they put assets into an offshore trust, each year the trust earns income, and when the trust is dissolved.
Residents who move shares, real estate, or other property into an offshore trust owe a 20 percent tax on any gain over the original cost.
They owe the same 20 percent tax every year on what the trust earns, such as interest, dividends, and capital gains, even if they receive none of it. Income already taxed is not taxed again when the trust pays it out.
When a trust is dissolved, any gain is taxed as a dividend.
The rules also reach back in time. Tax owed on assets moved into trusts since 2023 was due within the grace period, and for large sums, authorities can go back even further. Undeclared trust income from before 2026 was also due in that window. That income was lumped together and taxed as dividend income, at the same 20 percent rate.
A fund management professional in China’s banking sector told The Epoch Times in July that the rules create lifelong tax obligations on overseas assets and force taxpayers to explain where their wealth came from. If they cannot, penalties could cost more than the 20 percent tax itself, he said.
State media have presented the tax as routine. Li Xuhong, a professor at the Beijing National Accounting Institute, told Xinhua that taxing residents on what they earn at home and abroad is a basic principle of Chinese tax law and common practice around the world.
But China also limits how much money its citizens can move abroad. Individuals can freely buy only $50,000 in foreign currency a year, so anyone declaring a large offshore trust may have to explain how the money left China. A partner at a Shanghai family office told Reuters in August that some clients feared an investigation into exactly that.
How It Compares to US
The United States taxes Americans on income from foreign trusts. The difference is in how China made its rules and how it enforces them.
Beijing’s rules came as a government notice that took effect the day it was issued, with no vote in the legislature. In the United States, Congress wrote the foreign trust rules into the tax code.
Contesting a bill is more difficult in China. Taxpayers must first pay the disputed amount, with late fees, or post a guarantee before seeking administrative review.
Americans can contest an IRS bill in the U.S. Tax Court before paying.
A Wider Squeeze
Some of China’s richest people dissolved trusts, sold shares, and even switched their nationality ahead of the deadline, wealth advisers and lawyers told Reuters in October.
The tax agency had ordered staff to identify those who owed taxes, using lists drawn from the Hurun wealth rankings and corporate filings, three people told the news agency.
Switching passports may not help. The rules allow authorities to treat people who hold foreign citizenship or overseas residency as Chinese residents if their main economic interests remain in China. Anyone who does give up Chinese tax residency owes tax on the trust’s gains up to that day.
The tax net is already widening. In July, an insurance adviser told The Epoch Times that overseas savings insurance policies could be taxed before the year ended.
By August, tax offices in Beijing and Hangzhou had started taxing returns on such policies, Reuters reported.
Chinese tax law also lets authorities bar taxpayers, or the legal representatives of companies, from leaving China if they do not settle their bills or post a guarantee.
On Oct. 22, a tax bureau in Zhenjiang, in eastern Jiangsu Province, announced exit bans on the legal representatives of nine companies.
The regime is also writing new powers into law. A draft revision of China’s tax collection law, submitted to the rubber-stamp legislature on Nov. 2, would let tax authorities, with approval, take steps such as freezing the bank accounts and seizing the property of individuals who owe very large sums.
Fiscal Strain
Taxes tied to property have slumped along with land sales. Deed tax and land value-added tax receipts each fell 14.5 percent in the first nine months of 2026, according to Finance Ministry data. Personal income tax revenue, by contrast, rose 14.1 percent over the same period, to 1.35 trillion yuan (about $200 billion).
Xia Yan, a Chinese political commentator, told the Chinese edition of The Epoch Times that demanding more than 100 billion yuan in back taxes by a deadline amounts to an emergency cash grab by fiscally troubled local governments.
“Offshore trusts are unlikely to be the final target,” an insurance adviser told The Epoch Times in July, adding that other overseas investment vehicles could also come under scrutiny.
Reuters and Michael Zhuang contributed to this report.
