PRC Individual Income Tax on Offshore Trusts Considerations for Offshore Trust Structures

Jul 2026

There are significant practical implications for offshore trusts following the jointly issued announcement of the PRC Ministry of Finance and the State Taxation Administration concerning individual income tax on offshore trusts (the “Announcement”)¹.

Conyers does not advise on PRC law, but the Announcement is applicable to offshore trusts in many jurisdictions. Our understanding is that offshore trusts within scope of the regime will broadly be treated as tax transparent as regards the settlor with the Announcement describing a tax regime which imposes individual income tax across the full lifecycle of the trust with potential tax triggers at each of the following times:

1. when property is settled into the trust;
2. on an annual basis throughout the administration of the trust;
3. on termination of the trust; and
4. a further potential tax event arising on the death of the settlor where interests pass to non-PRC residents (with a filing and payment obligation imposed on the offshore trustee at that point in time).

There are also deemed-distribution rules which apply to treat various benefits as taxable income.

Importantly, the Announcement is applicable to existing structures with a 90-day transitional filing window to bring such structures into compliance. As such, affected individuals should seek advice on their position as a matter of urgency, particularly those who (i) have settled property into offshore trusts since 1 January 2023, or (ii) have trust income accrued during the existence of the trust before 1 January 2026.

Who May Be Affected

The Announcement is potentially relevant to any offshore trust with connections to the PRC, including where:

• the settlor is, or was at the time of settlement, a PRC resident individual;
• beneficiaries include PRC resident individuals;
• the trust holds assets connected to the PRC (directly or through underlying entities); or
• there is a non-resident settlor, but the trust is in fact controlled by, or distributions are in fact enjoyed by, a PRC resident individual.

Notably, individuals who have obtained foreign nationality or long-term permanent residency abroad may still be treated as PRC resident individuals if their principal economic interests are derived from within China. The Announcement therefore has very broad application and may capture settlors who otherwise considered themselves outside the PRC tax net.

Implications for Offshore Trustees

Although it’s early days for implementation, trustees do not appear to bear the primary compliance burden. That burden is placed first on the settlor as taxpayer, and following the settlor’s death, on the settlor’s successor who is a PRC resident individual who then assumes ongoing reporting and payment obligations in the settlor’s place. How this concept of “succession” applies to a discretionary trust where no beneficiary holds a fixed interest is not addressed in the Announcement and should be raised with PRC advisors where relevant.

The one scenario in which a direct reporting and filing obligation appears to fall on the trustee itself is where the settlor dies and interests pass to a non-resident individual (or there is no “successor”). In that case, the trustee (or its designated PRC-based institution) must declare and pay the tax arising on the deceased’s behalf, including any historic unpaid liability. Trustees should be alert to this scenario in particular, as it places a direct compliance burden on them personally.

More broadly, even outside this scenario, trustees will likely need to remain closely involved in the compliance process to ensure a settlor can meet their own obligations and will need to carefully consider their procedures and the terms of the trust in how they manage the process.

How We Can Help

Conyers advises on the laws of the Cayman Islands, British Virgin Islands and Bermuda and are well-placed to assist clients and their PRC tax advisers with the offshore-law aspects of any review, compliance exercise and planning.

While the changes do represent a significant evolution in the tax treatment of offshore trusts, they are not entirely unfamiliar in character: offshore trustees and trust lawyers are well-accustomed to managing tax obligations in high-tax jurisdictions such as the US and UK, and this development follows a recognisable pattern. As with those jurisdictions, there will remain a legitimate and valuable place for offshore private wealth structures in clients’ planning, and offshore advisers retain a wide range of tools to help clients structure their affairs effectively in compliance with all relevant laws.

The immediate priority for affected clients is to bring existing structures into compliance within the 90-day period. Clients may then wish to consider how the Announcement affects existing structures and whether there is a continuing case for maintaining those structures in their current form. While some structures may remain fit for purpose, for others it may be an appropriate juncture to consider simplification or reorganisation, bearing in mind the potential tax consequences. Once clients have had the opportunity to fully digest the Announcement, they may wish to revisit their broader succession and wealth planning objectives. Any such review should, of course, be undertaken in close consultation with PRC tax advisers.

We encourage clients with offshore trust structures that may be affected to contact us at an early stage so that we can work alongside their PRC tax advisers to assess the position and consider next steps.

This Article is provided for general information purposes only and does not constitute legal, tax or other professional advice. Conyers does not advise on PRC tax law or any other tax matters, and nothing in this Article should be relied upon as tax or legal advice or as a substitute for specific advice from a qualified adviser.

¹ Announcement No. 21 [2026], Announcement of the Ministry of Finance and the State Taxation Administration on Matters Relating to Individual Income Tax on Offshore Trusts, the Ministry of Finance and the State Taxation Administration [2026] No. 21, issued and effective 24 July 2026.