In the backdrop of sluggish economic growth and widening fiscal deficits in China, the Chinese Communist authorities are eager to expand their sources of revenue, with offshore trusts becoming a target for taxation. Offshore trusts are an important tool for Chinese billionaires to protect their assets and avoid risks. Analysts believe that for the wealthy, besides facing taxation, they also encounter issues such as decreased asset confidentiality and heightened political risks.
Recently, sources have revealed to Western financial media that tax authorities in Jiangsu, Shenzhen, and other regions in China have requested owners of offshore trusts to declare detailed financial information including investment profits like dividends and shares disposals. Starting from early 2025, Shanghai began to require reporting of income information from the past two years. In one case, a local tax bureau demanded a 20% tax levy on investment profits along with additional fines.
Professor Sun Guoxiang from the Department of International Affairs and Corporate Management at Nanhua University in Taiwan stated on June 3 to Epoch Times that while taxation is indeed a direct purpose, it is not the only objective. “The deeper purpose is to bring the overseas assets of the wealthy back within the visible, traceable, and controllable range of the Chinese Communist Party.”
Sun Guoxiang pointed out that offshore trusts often involve overseas equity, dividends, asset inheritance, immigration arrangements, control rights of Hong Kong-listed companies, and USD asset allocation. The requirement for reporting related profits is not only about tax collection but also about understanding capital flows, overseas asset scale, substantive controllers, preventing the wealthy from completing “asset migration” and “systematic detachment” through offshore structures.
“On the surface, it’s about tax investigation, but in reality, it’s about asset scrutinization, control rights scrutiny, capital flight investigation, and also a reminder to private capital and super-rich individuals: wealth can be globally deployed, but it must remain under the supervision of the Party-State. This reflects the Party’s governance over the wealthy class, extending from domestic corporate regulation to global asset management,” he said.
The focus of the tax investigation by the Chinese Communist Party on offshore trusts refers to trusts established in overseas jurisdictions, commonly located in low-tax “tax havens” such as the Cayman Islands, British Virgin Islands, Cook Islands, and Hong Kong.
Trust assets can include a wide range of items such as deposits, securities, real estate, land, equity, valuable tangible items, as well as intangible assets like patents or trademark rights. Trusts have several key benefits as asset management tools, including the functions of “asset isolation,” “asset succession,” and “privacy protection.” Offshore trusts add an additional layer of “cross-border protection” and “judicial isolation.”
The Chinese “Hurun Rich List” is jokingly referred to as the “pork-killing list,” as Chinese billionaires have been establishing offshore trusts to protect their assets. Family offshore trusts are among the most common types.
A study from 2023 revealed that family offshore trusts in China started around 2007 and showed accelerating development trends from 2018. Over 60 founders of overseas-listed companies have established family offshore trusts.
According to a report by “China Operations News,” in 2018 alone, 15 Chinese entrepreneurs listed only in Hong Kong set up offshore trusts, transferring a total of $28.5 billion in assets overseas, including Alibaba’s Jack Ma, Pinduoduo’s Huang Zheng, Xiaomi’s Lei Jun, Haidilao’s Zhang Yong, Longfor Properties’ Wu Yajun, JD.com’s Liu Qiangdong, Sunac’s Sun Hongbin, and Dali Foods’ Xu Shihui.
Offshore trusts serve as a means for Chinese billionaires to transfer assets overseas to mitigate financial risks and respond to increasingly strict anti-corruption measures and capital control measures imposed by the Chinese authorities. When offshore trusts are subjected to taxation, what potential impacts could it have on Chinese billionaires?
Sun Guoxiang stated that the biggest impact on Chinese billionaires is not simply paying more taxes but rather experiencing decreased asset confidentiality, increased tax costs, restricted fund allocation, and heightened political risks.
There are two significant categories in Chinese billionaires’ trust planning: “revocable trusts” and “irrevocable trusts.” Among them, “irrevocable trusts,” once established and asset transfers completed, sever the relationship with the trustor, providing the trusts assets with stronger legal protection.
However, even “irrevocable trusts” are not entirely reliable, as the key lies in who truly holds the control rights. The case of the trust of the Xu family, founders of Evergrande, being pierced through is a typical example.
As publicly reported, Evergrande Group’s founder Xu Jiayin and his ex-wife Ding Yumei set up a family trust in Delaware around 2019 with an approximately $2.3 billion scale, with their two sons as beneficiaries. The trust documents stipulated that the principal cannot be altered, revoked, or reclaimed.
However, in September 2025, the Hong Kong High Court ruled in the liquidation process of Evergrande, authorizing the liquidator to take control of Xu Jiayin’s global assets, including part of the assets held through offshore companies and trusts. The judge stated in the judgment that even if the assets are placed in a discretionary trust, if the substantive facts indicate that the relevant defendant can control the operation of the discretionary trust, the court can still impose an injunction.
Regarding whether Chinese billionaires would conceal their overseas assets during tax investigations, Sun Guoxiang believes that the vast majority would not dare to do so due to the high risks involved.
He explained that the assets, families, companies, household registrations, and corporate control rights of these billionaires are highly tied to China, and the cost of non-disclosure could be significant. Once discovered, it could not only lead to back taxes and fines but also impact corporate financing, listing reviews, outbound restrictions, anti-corruption investigations, and even political loyalty issues. Therefore, most billionaires would not openly resist.
The setup costs of offshore trusts are relatively high, coupled with subsequent management costs. It is estimated that these trusts mainly focus on the “ultra-high net worth individuals” group, with investable assets exceeding $10 million, especially for families with assets reaching billion-dollar RMB levels. Many major shareholders of large Chinese enterprises are entrustors of offshore family trusts.
Sun Guoxiang believes that the Chinese Communist Party’s tax investigation on wealthy offshore trusts could lead to short-term consequences for these billionaires such as back taxes, fines, late payment fees, and investigations into past years; in the medium to long term, they may face asset reshuffling, particularly involving equity of Hong Kong-listed companies, overseas family offices, USD assets, and family trust arrangements, which may be forced to redesign.
“They may adopt strategies of outward compliance, private restructuring, and gradual relocation,” he said, mentioning that the wealthy would accelerate the migration of identities and assets.
[Source: Epoch Times]