China tightens tax on offshores trusts of super-rich with HK-listed shares

Chinese regulations are stepping up taxation on offshore trusts that hold shares in Hong Kong-listed companies, targeting a common route for China's super-rich to invest billions of dollars overseas, Bloomberg reported.

Provinces and cities such as Jiangsu and Shenzhen require trust owners to declare detailed financial information, including investment income such as dividends and share disposals.

Shanghai has required the declaration of income information for the past two years since the beginning of 2025, the report said, citing sources.

The report pointed out that some local tax authorities are seeking to impose a 20 percent tax on investment income with additional penalties, while some provinces require disclosure of income obtained from offshore trusts in the past two years.

The report also pointed out that this move highlights the authorities' crackdown on offshore structures, long considered a gray area for tax enforcement, and is part of China's increased efforts to investigate unpaid taxes on overseas assets. A particular focus is on offshore trusts held by red-chip companies.

With increasing regulatory scrutiny, some business owners have shown hesitation in establishing such shareholding structures for Hong Kong IPOs.

Some companies seeking listings have also been advised to dismantle their red-chip structures and use domestic entities to pursue Hong Kong listings.

It is unclear how far back the inspectors will trace the relevant income, or whether penalties will be imposed.