China’s new 20% tax on offshore trusts is prompting wealthy Chinese individuals to review liabilities, raise cash and reconsider investment structures, lawyers and advisers say. The rules, overhauled in late July, tax appreciation when shares, property or other assets are transferred into offshore trusts, as well as annual income from those trusts and entities they control. Unpaid taxes on assets placed in trusts since January 2023 and trust income received before 2026 must be reported within 90 days. Tax offices in cities including Beijing and Hangzhou have also begun enforcing taxes on returns from offshore insurance policies. The measures affect wealth estimated by BCG at up to $1.2 trillion held by mainland Chinese ultra-high-net-worth individuals in Hong Kong, Singapore and other low-tax jurisdictions. More than half of China’s super-rich use offshore family trusts, according to Julius Baer and KPMG. Some clients are considering unwinding trusts, liquidating mainland A-shares or borrowing against illiquid assets to pay tax bills, while others are avoiding new trusts and using smaller offshore asset managers. The campaign is also raising concerns about investigations into how funds left China and a possible expansion into overseas employment income, offshore stock-trading gains and capital-control enforcement. China’s use of the Common Reporting Standard (international exchange of financial-account data) and Golden Tax Phase Four (an expanded tax data system) gives authorities more ability to cross-check offshore assets and income.