UBS Hong Kong Strategy: Key Takeaways from the Expert Call on New Offshore Trust Tax Rules

UBS hosted an expert call on China's new offshore trust tax rules (Article 21), which clarify tax treatment across the full trust lifecycle—establishment, operation, and termination—and apply to both Chinese and non-Chinese tax residents, covering a broad span of assets including ultra-high-net-worth portfolios. Assets transferred into offshore trusts on or after January 1, 2023 may be deemed taxable events, with unrealized gains potentially facing 20% individual income tax; income and gains generated by such trusts may be taxed at 20% throughout their life. Taxpayers have a 90-day window ending October 22, 2026 to regularize historical tax positions, and recovery actions to date have ranged from hundreds of thousands to billions of Hong Kong dollars. Investment losses cannot offset dividend, interest, or other distribution income, which must be taxed separately. The expert sees China converging with developed-economy global tax frameworks, with Hong Kong expected to implement CRS 2.0 in 2029 covering tax-year 2028 information. Unresolved tax issues may pressure wealth effects, dampen Hong Kong's talent appeal and housing market, and prompt controlling shareholders of offshore-listed non-SOEs to sell shares for compliance.