Putting money on an island does not move your tax bill

Where the story starts

Cash can only leave through a thin pipe

A person in China can change about USD 50,000 a year into foreign money and send it abroad. That is the limit most reports and banks quote.

Bigger families looked for another way out. Many chose a trust.

Limit as reported by SCMP, 2017 and a bank guide. We did not re-check the 2026 figure.

The tool

A trust is a locked box with a rule book

You put money in. A person you hire, the trustee, looks after it. Your rule book says who gets what, and when.

A parent might write: one share at 25, the next at 30.

The big idea

Tax follows the person, not the box

The island only decides who looks after the box. It does not decide who is owed tax.

If you live in China, China's tax office looks at the box too, wherever it sits.

The new rule

On 24 July, China wrote the rules down

China's Ministry of Finance and tax authority published Announcement No. 21 of 2026. It took effect the day it came out.

It reaches three moments: money going in, every year after, and the end.

Source: State Taxation Administration.

Moment one

Moving money in is treated as a sale

Say shares you bought for 1 million are worth 9 million today. Put them in the trust, and the tax office acts as if you sold them at 9 million.

The gain is 8 million. At the reported rate of 20%, the bill is 1.6 million. You sold nothing and got no cash.

Example numbers. Rate reported by four outlets; the notice text we read does not state it.

Moment two

Every year, the trust's income is taxed to you

Say the trust gets 0.5 million in dividends and pays the children nothing. You still owe tax on it: 0.1 million at 20%.

It does not matter if the money is ever paid out.

Example numbers. Article 4 of the notice.

A common hope

A foreign passport does not end it

Tax follows where your money life is. If your main work, home and money are still in China, a foreign passport or permanent residence elsewhere does not end Chinese tax residence.

Article 11 of the notice.

The cost of running it

The fees do not lower the bill

You pay a trustee, lawyers and advisers to run a trust. None of those fees can be taken off before the tax is worked out.

Example numbers. Article 4 of the notice.

Moment three

The end of the story counts too

Three events each set off another tax calculation: an exit from the trust, a move abroad, and a death with no heir living in China.

Articles 5 to 7 of the notice.

And the islands?

The islands tightened rules for firms, not for your tax

Cayman's regulator published anti-money-laundering and sanctions rules on 20 July. They start on 18 September and apply to firms it regulates.

The British Virgin Islands said a new fee system for company filings comes in 2027.

CIMA rule · BVI FSC Circular 20 of 2026

Follow the incentives

Who gets paid when you choose?

The tax office is paid on every path. Trustees and advisers are paid when you act: keep, change, move or close.

Nobody is paid to do nothing. So ask who is advising you to act, and what they earn if you do.

The clock

7 days left to report older trusts

Trusts set up from 2023, and income from before 2026, can be reported until 22 October 2026 with no late charge. The deadline removes the late charge, not the tax.

In hardship, tax may be paid in instalments over up to 5 years.

Articles 15 and 17 of the notice. Days counted from 24 Jul.

Before any move

Two questions beat any island

1. 1Which country can tax me, wherever I put the money?
2. 2Who gets paid if I say yes, and who gets paid if I do nothing?

The island holds the box. It does not hold the tax.