Announcement No. 21 of 2026
One announcement, three dates, and a record most structures cannot produce.
On 24 July 2026 the Ministry of Finance and the State Taxation Administration issued Announcement No. 21, effective on issue. A companion announcement, No. 15, was issued by the State Taxation Administration on the same day, together with an official set of questions and answers.
Between them they bring the whole life of an offshore trust within PRC individual income tax where the settlor or a beneficiary is a PRC tax resident. The rate is 20% throughout, applied either as property transfer income or as interest, dividend and bonus income.
Three dates
01
22 October 2026
The 90-day transition window closes. Tax unpaid on assets settled between 1 January 2023 and 31 December 2025, and on trust income arising before 2026, may be reported and settled without late-payment surcharge.
02
31 December, each year
Loans, security and guarantees given out of trust property for a resident individual must be released or repaid by 31 December of the same year, or they are treated as a distribution. 2026 is the first year this bites.
03
1 March to 30 June 2027
The first annual return, for the 2026 year. The same window applies in each year after that.
Event-driven returns fall due within 15 days of the following month: termination, death, and a change from resident to non-resident status. On termination and on death, where payment in a single sum would cause hardship, the tax may be paid in equal instalments over up to five years once filed with the tax authority.
What the rules change
Settling assets into a trust is treated as a disposal at market value. The charge is on market value at settlement less original cost and reasonable expenses; the cost base is then stepped up to that market value for later years.
Income arising inside the trust is taxed annually on the resident settlor, whether or not it is distributed. Income already taxed is not taxed again when it is actually distributed.
Where a trust was settled by a non-resident, value passed to a related resident individual can be deemed a distribution: loans, security and guarantees left outstanding at the year end, expenses paid or reimbursed, use of trust property free of charge or plainly below market value, and value routed through a third party or through the individual's related parties.
Offshore companies are looked through to the individual behind them if they meet any one of four tests: passive and low-risk trading income exceeding 50% of total profit in the previous year; failing substantive-operation conditions on employees, registered premises and accounting; funding an individual's personal consumption or asset purchases; or not in fact making their own operating decisions. Meeting one is enough — a company below the 50% line is not therefore safe.
Control is presumed at a direct or indirect holding of 25% or more of equity, voting rights, shares, rights to income or similar interests. Indirect holdings are multiplied layer by layer, but an intermediate layer above 50% counts as 100%. Below 25%, substantive control over funding, operations, purchases and sales or distributions is control all the same.
Licensed financial institutions are outside this. Banks, insurers and securities firms regulated where they sit, dealing with the public at large and bearing their own risk, are not offshore entities; nor are the financial products they issue. So are other organisations that can evidence a genuine commercial purpose and real operations — the taxpayer has to produce that evidence.
A foreign passport does not settle the question. An individual holding foreign nationality or long-term or permanent residence abroad, whose main economic interests remain in the PRC, may still be treated as domiciled and therefore resident.
Tax paid abroad of the same character on the same trust may be credited.
Why existing structures are exposed
Most existing structures were built on a different set of assumptions, and few hold the records a PRC return now requires: cost at the date of settlement, a valuation for each year, and evidence that will still answer an enquiry raised years later.
Where the taxpayer cannot produce a value, or produces one that is not reasonable, the authority may have the asset valued instead. Where the taxpayer cannot evidence a genuine commercial purpose and arm's-length terms, the authority may adjust by a reasonable method. The burden of proof sits with the taxpayer throughout.
Information exchanged under CRS and FATCA reaches the authorities whether or not a return has been filed.
Where you may be exposed
Five questions. If you cannot answer one of them today, start there.
- 01Who settled the structure, and were they PRC tax resident at the time?
- 02Who controls it now, and who can remove the trustee?
- 03Who has received value from it since it was established?
- 04What has been reported so far, and to whom?
- 05Can you evidence the source and the original cost of the assets that went in?
What we do
Review the structure and write down what it actually is.
Assemble the trustee's records: what was settled, when, at what cost, what was distributed and what was retained.
Set out the options in writing, each costed in tax, in professional fees and in the time required.
Organise and liaise on retrospective settlement, and run the annual cycle so the reporting window is never missed.
Restructure or migrate where the current vehicle no longer holds, and align distributions with licensed products.
PRC tax opinions and returns are prepared and submitted by licensed onshore tax agents. We organise the work and hold the record.
A detailed note is available on request — the rules in summary with article references, review and remediation options, filing, retrospective settlement and the annual cycle.
EMAIL J.Hu@perenniafiduciary.com
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This is a summary written for general information. Positions should be confirmed against the published text and applied to the facts of the individual case; administrative guidance continues to develop.