China's New Rules Tax Offshore Trusts, Hit U.S.-China Families Hard

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On July 24, 2026, China's Ministry of Finance and State Taxation Administration issued new rules imposing a 20% individual income tax (IIT) on Chinese tax residents who transfer property into offshore trusts, earn income inside those trusts, or receive distributions from trusts funded by non-residents. The rules apply retroactively, but the statute of limitations generally shields taxpayers from liability before 2021; any previously unreported income must be reported and paid by October 22, 2026 to avoid late-payment surcharges.

The rules can hit U.S. citizens and green card holders who also qualify as Chinese tax residents — defined as anyone whose 'primary economic interests are derived from within China,' even if they live in the United States. As an example the article provides: a U.S. citizen who transfers $15 million in assets with a zero cost basis into a Delaware trust would owe China a 20% IIT on the full $15 million gain at transfer — and when the asset is later sold, the U.S. would tax the same $15 million gain again, with no available credit mechanism to offset the Chinese tax already paid. Families with cross-border U.S.-China ties and existing offshore trusts should consult legal counsel before the October 22, 2026 deadline.