Key facts
- The finance ministry said Hong Kong Mandatory Provident Fund accounts are regulated by the MPF Schemes Authority and do not fall under the offshore trust definition.
- For non-listed equity placed into a trust before the announcement, market value may be set by the net asset method and cannot be below the corresponding net asset share.
- Where a major shareholder sells trust-held shares and the company issues an equal number of new shares to the same trust at the same price within 14 days, the sale is not treated as a transfer of trust property.
- Where no tax was paid at the contribution stage, the original cost of property is not adjusted to the market value at contribution and stays at the acquisition price.
- Trusts terminated before the announcement, or where the person who contributed the property has died, are not subject to retroactive tax under Articles 5 and 7.
China's finance ministry on November 13, 2026 published a question-and-answer document setting out how it will apply the offshore trust tax announced in a July 24 circular. The document, posted on the ministry's website, states that Hong Kong Mandatory Provident Fund accounts are regulated by the MPF Schemes Authority and offer standardized pension services to unspecified clients, so they do not fall under the offshore trusts covered by the tax.
The guidance sets out valuation and calculation methods. For non-listed company equity placed into an offshore trust before the announcement, market value may be determined using the net asset method and cannot be lower than the net asset share corresponding to the equity. After personal income tax is paid at the contribution stage, the original cost of the property is adjusted to that market value.
For Hong Kong listed companies raising funds through a placing of existing shares followed by new shares, where a major shareholder sells part of the shares held through an offshore trust and the company then issues an equal number of new shares to the same trust at the same price within 14 days of signing the placing agreement, the sale is not treated as a transfer of trust property and the original cost of the shares is not adjusted.
The document also addresses exchange rate rules. Trusts set up on or before December 31, 2025 use the renminbi central parity rate of that date for calculating taxable income at the contribution stage and for income in 2025 and earlier years. From January 1, 2026, taxable income is calculated using the central parity rate of the last day of the previous tax year.
On retroactivity, the ministry said trusts terminated before the announcement, or where the person who contributed the property has died, are not subject to retroactive tax under Articles 5 and 7. Tax due on the contribution of property and on income during the trust's existence is still collected under Article 17, and where the contributor has died and another resident individual inherits the trust, the inheritor must file and pay.
The ministry also said a change of trustee alone does not count as termination and re-contribution of a new trust, and set out how the tax year is determined where the trust's jurisdiction uses a different tax year from the calendar year.