China’s wealthiest citizens faced a critical deadline on October 22 to declare and pay taxes on offshore trust income, triggering a scramble to move assets to U.S. banks amid a 20% tax on overseas gains.
China’s crackdown on offshore wealth hit a critical point as wealthy individuals rushed to meet a 90-day deadline to declare and settle taxes on income from foreign trusts. The 20% tax on gains from offshore trusts, announced in July, has forced many to liquidate assets or shift funds to jurisdictions outside the Common Reporting Standard (CRS), with U.S. banks emerging as a favored destination.
U.S. Banks Become Refuges as Chinese Wealth Moves Offshore
Chinese clients have increasingly turned to U.S. banks to evade Beijing’s tax scrutiny, leveraging the country’s exclusion from the CRS framework. It has become relatively prevalent,
said Tan, noting that clients began planning exits to the U.S. in July. U.S. banks, which are not obligated to share financial data with China, offer a temporary reprieve from disclosure, though legal experts warn the strategy is not foolproof.
They are gambling on not being disclosed, because the U.S. does not share information as part of the CRS system; they can dodge tax authorities,
said Clifford Ng, a partner at Zhong Lun law firm in Hong Kong. However, lawyers caution that moving money from Singapore or Hong Kong to the U.S. may not fully shield assets, as transfers could still be tracked by Chinese authorities. There would have shown up in China at some point,
Ng said, adding that tax authorities could still levy taxes on the income.
Tan noted that investment vehicles with reduced or no tax-filing obligations to the IRS are being explored by wealthy clients. The hurdle is not that high for Chinese clients to open American accounts and transfer assets there,
he said, adding that large private banks are preferred for high-net-worth individuals while smaller accounts use regional banks or online brokers.
Tax Rules Tighten as Beijing Seeks to Recoup Offshore Wealth
The new rules, issued by China’s Ministry of Finance and State Taxation Administration on July 24, treat the transfer of property into offshore trusts as a taxable event. This has prompted a flurry of activity as wealthy families liquidate assets to meet obligations. Dan Wang of Eurasia Group noted that China’s fiscal pressures will sustain enforcement, with personal income tax becoming a critical revenue source.
The measures include taxing returns on offshore insurance policies, a step described as stricter enforcement of existing taxes rather than new levies. Tax offices in Beijing and Hangzhou have also begun scrutinizing such income. The crackdown closes a longstanding loophole used by wealthy families for asset protection and succession planning.
Economic Pressures Drive Aggressive Tax Enforcement
The crackdown coincides with China’s deepening economic challenges, including a property crisis that has slashed land sale revenues. In 2025, the official general public budget deficit reached RMB 5.66 trillion ($793.9 billion), more than doubling since 2019.
Nearly no sizeable money onshore will be able to leave the country from now on,
said Jingkuan Lin, a private banker at Bank of Singapore. The shift has left the offshore banking industry increasingly focused on serving existing capital outside China, as new outflows face growing restrictions.
The property market’s prolonged stress has denied a key revenue source for local governments, with land sale revenue declining for four consecutive years.
China’s fiscal strain has also prompted speculation about potential inheritance taxes. Developing economies often look to China and the U.S. for tax policy cues, but India’s distinct economic context necessitates a different approach. Since joining the WTO in December 2001, China’s average income has risen from just over $1,000 to over $14,000.