The Zhitong Finance App learned that on November 13, the Ministry of Finance issued a question and answer on the personal income tax policy for offshore trusts. Among them, with regard to the determination of the market value of shares of unlisted companies into offshore trusts, the Ministry of Finance stated that before the “Notice” was issued, individuals placed unlisted company shares in offshore trusts. The market value of unlisted company shares can be determined in accordance with the Net Asset Verification Law, and its market value cannot be lower than the net asset share corresponding to the equity. After paying personal income tax during the loading process, the original value of the property is adjusted to the market value determined during the loading process. When an offshore trust actually transfers shares, personal income tax is calculated and paid based on the balance of the income after deducting the original value of the property and reasonable expenses.
The original text is as follows:
Offshore Trust Personal Income Tax Policy Calibration Q&A
1. Q: If an individual resident did not pay personal income tax during the installation process, how can the original value of the property be adjusted?
Answer: According to the provisions of Sections 3 and 17 of the “Notice Concerning Matters Relating to Personal Income Tax on Offshore Trusts” (hereinafter referred to as the “Notice”), if an individual resident has not paid personal income tax because the market value is lower than the original value of the property when the property is incorporated into an offshore trust or the tax payment exceeds the collection period, the original value of the property is not adjusted to the market value at the time the individual acquired the property, and the original value of the property is still confirmed according to the price at which the individual acquired the property.
2. Q: Before the policy was issued, if individual resident offshore trusts have been terminated and individual residents have died, are offshore trusts subject to personal income tax on offshore trusts?
Answer: According to the provisions of Article 17 of the “Notice”, if an individual resident offshore trust has been terminated or the individual resident has died before the “Notice” is issued, personal income tax shall not be subject to personal income tax in accordance with the provisions of Articles 5 and 7 of the “Notice”; the tax payable arising from the asset being incorporated into an offshore trust and the offshore trust during the existence of the offshore trust shall be collected in accordance with the provisions of Article 17 of the “Notice”. Among them, if the individual resident incorporated into the property has died and the offshore trust is inherited by another individual resident, the successor shall file the tax in accordance with the provisions of Article 17 of the “Notice”.
3. Q: When calculating personal income tax on offshore trusts, what specific rules should be followed for exchange rate conversion?
A: According to the relevant provisions of the implementing regulations of the Personal Income Tax Law, the following exchange rate conversion rules should be followed when calculating personal income tax on offshore trusts:
First, when calculating the taxable income of offshore trusts established by individual residents before December 31, 2025 (inclusive), the median RMB exchange rate on December 31, 2025 is applied during the loading process and during the period of existence of the previous year. Starting from January 1, 2026, individual residents will obtain taxable income during the offshore trust loading process and during the period of existence. When filing the following year, the median RMB exchange rate on December 31 of the previous tax year will be applied.
2. When an offshore trust established by a non-resident individual before the date (inclusive) of the “Notice” is issued, the median RMB exchange rate on December 31, 2025 is applied to calculate taxable income during the loading process. From the date of publication of the “Notice”, non-resident individuals obtain taxable income during the offshore trust loading process. When processing the declaration next month, the median RMB exchange rate on the last day of the previous month will be applied.
Third, from the date of publication of the “Notice”, offshore trusts for individual residents were terminated, individual residents who were loaded into assets died, and offshore trusts were transferred from non-residents or uninherited, to non-resident individuals. When calculating liquidation proceeds, the median RMB exchange rate for the last day of the previous month shall be declared.
4. Q: If an offshore trust only changes the trustee, is it considered that the offshore trust has been terminated and reloaded into a new trust to calculate the payment of personal income tax?
A: During the life of an offshore trust, only the trustee changes. The new trustee inherits the relevant rights and obligations of the original trustee and continues to hold, manage, use, and dispose of the trust assets. It is not considered that the offshore trust is terminated and reinserted into the new trust to levy personal income tax.
5. Q: How is the tax year for offshore trust earnings during the life of an offshore trust determined?
Answer: According to the provisions of Article 9 of the “Notice Concerning Personal Income Tax Policy Relating to Overseas Income” (Ministry of Finance and the State Administration of Taxation Notice No. 3 of 2020), if the tax year where the offshore trust is located is inconsistent with the Gregorian calendar year, the Gregorian year in which the offshore trust is located on the last day of the tax year in which the offshore trust is located is used as the tax year in China corresponding to offshore trust income.
6. Q: Is the Hong Kong Mandatory Provident Fund an offshore trust referred to in the Notice?
A: The Hong Kong Mandatory Provident Fund is regulated by the Hong Kong Mandatory Provident Fund Schemes Authority and provides standardized pension finance services to unspecified customers. According to section 1 of the Notice, it is not an offshore trust within the meaning of the Notice.
7. Q: A Hong Kong listed company carries out financing through a “old first, then new” placement. The majority shareholder first sells some shares held by the offshore trust at a certain price, and then the company issues an equal amount of new shares to the majority shareholders at the same price. Is this considered a transfer of offshore trust assets?
A: Financing is carried out through a “old first, then new” placement. If the majority shareholder sells and buys shares through the same offshore trust, and issues new shares to the majority shareholder's same offshore trust within 14 days from the date the placement agreement is signed, the portion of the shares sold does not exceed the amount of shares purchased may not be considered a transfer of trust property, and the original value of the stock assets will not be adjusted.
8. Q: When the shares of an unlisted company are placed in an offshore trust, how is the market value of the unlisted company's shares determined?
A: Before the “Notice” was issued, individuals put the shares of unlisted companies into offshore trusts. The market value of the shares of unlisted companies can be determined in accordance with the Net Asset Verification Law, and their market value cannot be lower than the net asset share corresponding to the shares. After paying personal income tax during the loading process, the original value of the property is adjusted to the market value determined during the loading process. When an offshore trust actually transfers shares, personal income tax is calculated and paid based on the balance of the income after deducting the original value of the property and reasonable expenses.
This article was selected from the “Ministry of Finance” official website, Zhitong Finance Editor: Jiang Yuanhua.