appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

hooksArticlePageFloatingButtonConfigArticle

appConfig

filter

json

liveArticle

Daisy Wu

Months after Beijing unveiled a bevy of new tax rules for offshore trusts, the fallout has now reached New York City – home to one of the largest concentrations of mainland Chinese wealth outside Asia – after the changes swept across Hong Kong and Singapore.
Under the rules, which took effect on July 24, mainland tax residents who transfer property or shares into an offshore trust – or receive distributions from one – face a 20 per cent tax on realised gains, plus an annual tax on income the trust generates.
A 90-day grace period, running to October 22, allows taxpayers to declare and settle liabilities dating back to January 1, 2023, without incurring late-payment interest or administrative penalties.
With just over one month before that window closes, advisers serving New York’s Chinese community said affluent families were racing to review their cross-border wealth holdings.
“We’ve seen a clear uptick in families and their advisers reviewing existing offshore trusts,” said Larry Ikard, CEO of Yuvarra, an independent lender serving high-net-worth individuals (HNWIs).
The greater worry, he said, was not the tax bill itself but whether a decades-old structure could “still deliver the original goals – protection, succession and practical liquidity – once ownership and family circumstances start changing”.
Closing the capital loophole
Offshore trusts have long been the bedrock of global wealth management for China’s elite, allowing for risk mitigation and serving as quiet vaults for succession planning and cross-border asset allocation.
More than half of the country’s ultra-HNWIs – typically defined as those with a net worth or investible assets of at least US$30 million in value – managed their wealth using such vehicles, according to a report from KPMG, and frequently transferred shares or capital into entities registered in low-tax jurisdictions. Among the venues most favoured by Chinese investors are the Cayman Islands and the British Virgin Islands.
The practice has expanded rapidly over the past two decades, as Chinese entrepreneurs sought access to international capital markets and global investments. Boston Consulting Group estimated that up to US$1.2 trillion in mainland wealth now sat in offshore, low-tax hubs, including Hong Kong and Singapore.
Yet this staggering offshore capital pool created a persistent dilemma for Beijing: a massive, unchecked outflow of domestic wealth that left multibillion-dollar capital gains entirely outside the reach of tax authorities.
While we cannot say there is a panic, we can definitely feel stress from our clients and other stakeholders
Jean-Francois Harvey, Harvey Law Group
To stem illicit capital flight and close these long-standing regulatory loopholes, Beijing is taking direct aim at the structure. Under the new policies, Chinese tax residents face a 20 per cent levy on assets transferred into offshore trusts, annual investment yields and ultimate liquidation payouts.
In a joint statement announcing the measures, the authorities said the rules were designed to prevent individuals from using opaque, low-tax jurisdictions to “transfer assets, conceal wealth and evade tax”.
Li Daokui, a Tsinghua University economist and former member of the People’s Bank of China’s monetary policy committee, further noted in a social media post in early August that this approach established explicit tax obligations across every stage of a trust’s life cycle – from set-up and operation to eventual termination.
High-profile tycoons are already feeling the pinch. Soho China co-founders Pan Shiyi and Zhang Xin, who now live in New York, hold a major portion of their fortune via a Cayman Islands discretionary trust created before the developer’s 2007 Hong Kong listing. Domestic media reports indicated the structure could be exposed to billions of yuan in back-tax claims.
A wider circle of entrepreneurs who once relied on offshore trusts to list companies abroad – including Pinduoduo’s Colin Huang, Xiaomi’s Lei Jun, Haidilao founder Zhang Yong and Longfor’s Wu Yajun – are also being closely watched for how they handle potential deferred liabilities.
A calibrated approach to wealth
For affluent Chinese families navigating cross-border holdings, the immediate concern is more than the 20 per cent tax bill – it is what the crackdown suggests about Beijing’s evolving posture towards private capital.
“While we cannot say there is a panic, we can definitely feel stress from our clients and other stakeholders,” said Jean-Francois Harvey, founder and managing partner of Harvey Law Group.
The deeper anxiety, he noted, was not merely the added financial cost, but “the Pandora’s box it may open” by pulling decades of offshore assets into sharp regulatory focus.
Yet market analysts cautioned against viewing the offshore trust tax as a blunt war on private wealth creation. Instead, they said, the move reflected a broader, deliberate pivot to redirect capital into strategic domestic sectors crucial to China’s long-term industrial ambitions.


The relative value of onshore and offshore assets shifts with economic cycles, a gap that periodically drives speculative “hot money” across borders, as investors seek higher short-term returns. That back-and-forth flow of capital, however, has done little to help the “real economy”, according to Xiao Geng, associate dean of the School of Public Policy at the Chinese University of Hong Kong, Shenzhen.
Bringing offshore assets into a clear regulatory fold, he added, created a more predictable and stable environment that encouraged long-term investment at home.
As decades of rapid expansion driven by real estate and speculative asset appreciation wind down, China is seeking more sustainable growth drivers. Strategic industries – including artificial intelligence, semiconductors, advanced manufacturing and renewable energy – have moved up on Beijing’s list of long-term economic priorities.
China’s gross domestic product surpassed 140 trillion yuan (US$20.9 trillion) in 2025, expanding 5 per cent year on year. Within that total, added value generated by the “three new” economies – encompassing new industries, new business formats and new models – reached 25.79 trillion yuan, growing 6.2 per cent and outpacing overall economic growth.
To foster growth in these sectors, enterprises that are officially recognised as hi-tech qualify for a preferential 15 per cent corporate income tax rate, compared with the standard 25 per cent, while technical staff who receive equity rewards for commercialised research could defer personal income tax payments for up to five years.
The Private Economy Promotion Law, which took effect in May last year, backs private investment and entrepreneurship in strategic emerging and future industries, while offering stronger intellectual property protections.
This shift is increasingly reflected in China’s wealth rankings, where tech innovators are displacing real estate tycoons. Forbes’ 2026 ranking put ByteDance founder Zhang Yiming at the top for the first time, while Xiaomi’s Lei Jun broke into the top 10 and Cambricon Technologies’ Chen Tianshi became the country’s wealthiest figure in the semiconductor industry.
Levying taxes on offshore trusts, Xiao said, could help build “a clear, regulated framework” for cross-border capital flows and support China’s economic transition – measures he said would ultimately help stabilise both emerging tech drivers and traditional sectors.




The residency question
For New York City-based ultra-HNWIs, the immediate complication is determining whether they still fall under Beijing’s jurisdiction.
Under the refined rules, an individual can be classified as a Chinese tax resident based on where their “primary economic interest” lies, not physical presence. A US green-card holder in Manhattan could still be a Chinese tax resident if their equity, corporate control or dividend income remains tied to the mainland.
The picture is murkier still for mixed-residency families, who face a more tangled set of questions – including how the “primary economic interest” test interacts with existing tax treaties – that practitioners said remained unresolved.
Waiting out the deadline is not a realistic option, either. Under the Common Reporting Standard (CRS), overseas institutions will send account details to Beijing by September 30, regardless of whether individual taxpayers have filed anything themselves.
While some were exploring options to fast-track citizenship in third nations to relinquish Chinese nationality, Harvey said he doubted many would make it in time.
“The odds of securing alternative citizenship in time … are exceptionally low, making this a mid-to-long-term fix,” he said, adding that many clients would still face hefty tax payments this autumn.
Others are eyeing the US itself as a potential shelter, since Washington sits outside the CRS and does not automatically share domestic bank account data with foreign authorities. Advisers cautioned that the reasoning for this tactic was flawed.
The US enforces compliance through its own Foreign Account Tax Compliance Act – requiring foreign institutions to report on US taxpayers’ offshore accounts – and stringent beneficial ownership information mandates. These frameworks imposed heavy tax and disclosure obligations on individuals, trusts and corporate structures, Ikard noted.
He added that US tax law imposes a higher burden on non-resident aliens for estate or inheritance taxes. Unlike US citizens and green-card holders who enjoy a lifetime estate-tax exemption of roughly US$15 million, non-resident aliens receive an exemption of just US$60,000 upon death, with tax rates climbing to 40 per cent on any excess.
“Simply parking assets in a non-CRS jurisdiction like the US does not automatically remove Chinese tax exposure for people still connected to the mainland,” Ikard said.
“Moving the problem from one set of rules to another is rarely a clean solution.”
The competitive edge will belong to places that can stay with families after the initial structures are in place … Not just attract the capital in the first place
Larry Ikard, Yuvarra
A shift to compliance
Rather than rushing to liquidate assets, advisers reported that affluent families were taking a measured approach to bring their holdings into compliance before the deadline.
They laid out a typical timeline: starting with rapid fact-finding on historical transfers and valuations, then preparing voluntary disclosures that cover 2023–2025 liabilities before the grace period lapses. They would then widen the review to whether trusts, insurance policies and financing arrangements still worked together as a coherent whole.
A minority of clients were considering partial distributions, or limited restructuring, where doing so clearly reduced exposure or improved flexibility, but full unwinding remained uncommon, the advisers said.
They added that most families preferred to adapt an existing platform rather than start over – and guidance was still evolving in places – but the deadline was firm enough that waiting was no longer the safer option for anyone with material exposure.
“The vast majority of sophisticated families are focusing on understanding their exposure and preparing for compliance rather than making rushed structural changes,” said Neil Synnott, regional chief commercial officer for Asia-Pacific at IQ-EQ, a global investor services group.
“The conversation has shifted from ‘How do we optimise taxes?’ to ‘How do we demonstrate transparency, control and compliance across jurisdictions?’”
Wealth managers said they were not expecting Chinese families to abandon offshore trusts altogether. Instead, most anticipated a shift towards a structure built on stronger commercial, governance and succession rationales rather than pure tax minimisation.
Across Asia, Synnott said, wealth owners increasingly wanted institutional-grade frameworks around their private capital, with greater emphasis on governance, reporting and operational infrastructure – a shift that was already under way before the new rules, but one they were likely to accelerate.
“Greater regulatory clarity often encourages more disciplined planning and gives families a clearer framework within which to operate,” Synnott said. “In many markets, uncertainty is a bigger deterrent than taxation itself.”
For Hong Kong and other established Asia wealth hubs, that dynamic could prove an advantage rather than a threat, Ikard said, pointing to predictable regulation, deep professional expertise and the ability to support families across generations.
“The competitive edge will belong to places that can stay with families after the initial structures are in place,” he said. “Not just attract the capital in the first place.”


Wrise Prestige accelerates mainland China expansion with new offices, AI lab

New York City’s rich Chinese grapple with Beijing tax rules as enforcement deadline nears

Next-gen wealthy Hongkongers drop property for higher returns in deposits and hedge funds

China’s young investors embrace risk. Why are their portfolios so safe?

Wealth management

Illustration: Lau Ka-kuen

Deutsche Bank sees supply chains driving yuan’s rise in global trade

Growing cross-border trade and more flexible supply chains are driving wider use of the yuan, even as the US dollar retains its dominant role in global payments. Photo: dpa

Hong Kong’s yuan pool is growing. Can it turn liquidity into global demand?

Hong Kong regulators are seeking to expand use of the city’s growing pool of offshore yuan liquidity in global markets. Photo: Getty Images

Hong Kong poised to top New York, London in finance-hub ranking: GFCI creator

Hong Kong’s eventual rise to the top of the GFCI ranking hinges on it continuing to “treat everybody fairly”, ranking creator says. Photo: Jelly Tse

Hong Kong trailed London by a single point and New York by two in the most recent GFCI ranking. Photo: Reuters

China’s pension fund doubles offshore investments to new high in quest for higher returns

People rest outside a store in Beijing on August 31. Photo: AFP

Hong Kong-listed equities could have been a factor in the fund’s increase in offshore holdings in the last two years, according to an analyst. Photo: Nora Tam

Citi’s China-US corridor thrives as mainland firms hedge risks amid trade turbulence

Mainland Chinese firms rely on global institutions to navigate financial friction with the US, according to Citi. Photo: AFP

Business

Money

Wealth

Money News

Banking & Finance

With the 90-day grace period soon to run out, some ultra-wealthy living outside mainland China face complicated tax liability questions


With the 90-day grace period soon to run out, some ultra-wealthy living outside mainland China face complicated tax liability questions.


.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}With the 90-day grace period soon to run out, some ultra-wealthy living outside mainland China face complicated tax liability questions

With the 90-day grace period soon to run out, some ultra-wealthy living outside mainland China face complicated tax liability questions