China's wealthy individuals are queuing up to pay back taxes.

On October 22, a block trade of Bloks, a Hong Kong-listed trendy toy company, drew market attention.

According to the company's announcement, Smart Bloks Limited, a member of the controlling shareholder group, sold 3.849 million shares at a price of HK$65.28 per share, cashing out about HK$251 million. After the transaction, the entity's direct shareholding ratio dropped from about 3.57% to about 2.01%. Zhu Weisong, Chairman and CEO of Bloks, still holds approximately 52.03% of the company's equity and remains the controlling shareholder.

The company explained the sale as the shareholder's own capital needs and financial arrangements, emphasizing that the transaction has nothing to do with the group's business, financial status and development prospects.

As of the close of the day, Bloks' stock price fell 21.38% compared with the previous trading day.

The transaction took place on the last day of the filing window for historical stock tax returns of offshore trusts. The coincidence of time naturally sparked market associations, but the company's announcement did not confirm that the reduction funds were related to tax matters.

More than a month ago, a similar scenario played out at Haidilao.

On September 8, SP NP Ltd., the shareholding entity under the trust in the name of Shu Ping, wife of Zhang Yong, sold 259 million shares at a 6.7% discount, cashing out about HK$27.51 billion (equivalent to about RMB 23.52 billion); the next day, Haidilao closed down 9.14%, with the trading volume expanding to HK$37.81 billion, hitting a new low in nearly four and a half years.

What is odd is that in May this year, Zhang Yong himself just increased his holdings by 11.35 million shares at HK$13.39 per share, and publicly stated that "further increase in holdings will not be ruled out".

While the family increased their holdings on one side, the trust platform made a large-scale reduction on the other. Morgan Stanley bluntly stated in the research report that it was "surprising", and directly pointed out another possibility — the reduction may be related to the new offshore trust tax regulations in the Chinese mainland.

What on earth are the wealthy panicking about?

01

The Tip of the Iceberg

The storm center is July 24, 2026.

On that day, the Ministry of Finance and the State Taxation Administration jointly issued the "Announcement on Matters Concerning Individual Income Tax for Offshore Trusts" (No. 21 of 2026), which came into effect on the same day; on the same day, the State Taxation Administration issued the supporting Announcement on Collection and Administration No. 15 of 2026. This is the first time China has established individual income tax rules covering the whole process of establishment, existence, termination and liquidation for offshore trusts, with a unified 20% tax rate.

The industry summarizes it into 15 words: transfer upon placement, penetration during existence, liquidation upon termination.

Let's break it down.

Transfer upon placement. Article 3 of the announcement stipulates that when a resident individual places property into an offshore trust, the balance after subtracting the original value of the property and reasonable expenses from the market value at the time of placement shall be the taxable income, and 20% shall be paid according to "income from property transfer". In other words, once the assets enter the trust, it is deemed that you have completed a property transfer in tax law.

Penetration during existence. Article 4 of the announcement stipulates that the income generated during the existence of the trust and the overseas entities held, controlled and managed by it, whether actually distributed or not, shall be attributed to the resident individual and declared annually; the income is divided into two categories: dividends and bonuses, and property transfer, with corresponding tax items applied respectively, and the tax rate is 20% in both cases. No matter how many layers of shell companies are set up in BVI (British Virgin Islands) or Cayman, they are all regarded as "transparent entities" for tax purposes. Trustee remuneration, trust management fees, and legal service fees are all not allowed to be deducted; property transfer losses in the same year cannot be carried forward to offset the income of subsequent years.

Liquidation upon termination. When the trust is terminated, 20% shall be paid according to the liquidation income and in accordance with "income from interest, dividends and bonuses"; if a resident individual becomes a non-resident individual (such as immigration), the tax liquidation shall be completed at the market value on the day of identity conversion; if the trust is inherited by a non-resident after the death of the resident individual, the trustee shall make a declaration on their behalf.

Of course, the new regulation reserves a 90-day declaration window for existing trusts, and compliant declaration within the window period can be exempted from late payment surcharge.

90 days sounds not short, but for holders who have accumulated years of dividends in the trust, this is a cash problem.

How many people and how much money are in this net?

According to the Bloomberg Billionaires Index, among the 500 richest people in the world, eight Chinese billionaires and their beneficiaries may be greatly affected — they hold shares of listed companies whose main businesses are in China through overseas trusts.

Bloomberg calculated based on regulatory documents that as of the week of October 16, these shareholdings totaled about 140 billion US dollars, and most of them are the largest proportion of their respective family wealth. The trust registration places are all BVI and Cayman.

Among them, the shareholding related to NetEase founder Ding Lei is worth about 36.9 billion US dollars, Zhong Huijuan, founder of Hansoh Pharmaceutical, is about 15.8 billion US dollars, Zhang Bo and his family of China Hongqiao Group are about 15.4 billion US dollars, Yang Shaopeng of Sinotrans Shipping is about 6.9 billion US dollars, and Ding Shizhong of Anta Sports is about 5.2 billion US dollars.

What is the concept of 140 billion US dollars? The Boston Consulting Group estimates that the total amount of Chinese offshore wealth stored overseas is about 1.7 trillion US dollars. These eight people are just the tip of the iceberg above the water.

02

The Wealthy Circle Collectively Seeks Cash

The sharpest part of the new regulation is that it creates a mismatch: the tax base is the market value of the past, and the tax must be paid with today's cash.

Oscar Liu, CEO of wealth advisory firm JLT Legacy Group, told Reuters that founders of Chinese companies listed in Hong Kong and the United States have been hit the hardest, because many of them disposed of or placed stocks between 2014 and 2020, the peak period of trust valuation. He estimates that the tax payable in a single case may range from millions of yuan to hundreds of millions of yuan, or even billions of yuan.

An extremely widespread example in the market explains this mismatch very clearly: assuming a company has a market value of 2 billion US dollars when it goes public in 2021, the founder holds 5% of the shares, and the equity placed in the trust corresponds to 100 million US dollars; five years later, the industry withers, the company's market value falls to 200 million US dollars, and this part of the equity is only worth 10 million US dollars. However, the "placement tax" takes 100 million US dollars at the time of placement as the tax base, and about 20 million US dollars shall be paid — even if all the stocks are sold out, the tax bill cannot be covered.

It sounds exaggerated, but every step can be found in the announcement: the placement link is taxed at the fair value at the time of placement, and the property transfer loss cannot be carried forward to subsequent years for deduction. In plain English, the shrinkage of stocks is an investment loss and cannot offset the taxable income of the placement link.

Therefore, looking for cash has become a collective action observed by the market in the wealthy circle this autumn, and Reuters recorded a series of different situations.

A family office lawyer said that clients cannot use stock price losses to offset taxes; some real estate developers who obtained huge dividends in the past few years are now in such a fragile financial situation due to the downturn of the real estate market that they "cannot afford to pay the taxes owed".

The family office of a tech billionaire said that they now spend more time on tax calculation than on transactions, and are selling about half of their stock portfolio.

"It's like pulling the carpet out from under your feet," a related person described — they are required to prepare cash to complete the declaration within the window period.

A private banker at a large international bank revealed that the bank now provides loans to private clients to pay taxes, with the collateral being the shares of the client's own company.

A Hong Kong trust lawyer said that some wealthy people even closed newly established trusts before injecting capital; Reuters also reported that some people are withdrawing from offshore trusts, selling stocks, and even trying to change their tax status. A mainland woman with Hong Kong nationality and long-term residence in Hong Kong told the media that she gave up her mainland residence right, hoping to avoid the impact of the new regulations on her husband's wealth, even though her husband is not a mainland tax resident.

03

Which Wealthy Person Needs to Pay the Most Supplementary Tax?

Pulling the macro lens closer to a single company, the potential supplementary tax pressure has been calculated by the market into a series of figures.

Zhang Yong and Shu Ping of Haidilao are widely discussed samples in the market. Before the company was listed on the Hong Kong Stock Exchange in 2018, the two had set up a double-layer offshore trust: Apple Trust under Zhang Yong and Rose Trust under Shu Ping, which indirectly held shares through BVI companies ZY NP Ltd. and SP NP Ltd. respectively, and the trustees are UBS Trustees (B.V.I.). Both of them obtained Singaporean nationality many years ago.

But nationality does not automatically exempt from tax. The key to the judgment of China's individual income tax is the tax resident status, which depends on where the "main economic interests" are attached, not the color of the passport — this is also the core of the anti-tax avoidance logic of Announcement No. 21.

A number of market institutions have given calculations based on this.

According to the estimates cited by media such as Sina Hong Kong Stocks, under the new regulations, Haidilao has accumulated dividends of about 14 billion yuan in the eight years since its listing. Zhang Yong and his wife hold about 50% of the shares, and the trust account has received about 7 billion yuan. According to the 20% tax rate, about 1.4 billion yuan needs to be supplemented; plus the tax of about 500 million yuan corresponding to the current reduction cashing out about 2.352 billion yuan, the total supplementary tax scale of the two items is about 1.9 billion yuan, which is basically equivalent to the income from this reduction.

It should be noted that the figures such as "1.4 billion yuan" and "1.9 billion yuan" mentioned above are all deductions made by third-party institutions based on public data, not the final tax amount verified by the tax authority. As of press time, neither Haidilao nor Zhang Yong and Shu Ping have publicly confirmed the connection between the share reduction and the supplementary tax.

The stocks in the trust are paper wealth, and the tax bill is real money. The logic of market deduction is: if there is a large tax obligation, it may be necessary to sell stocks to prepare cash — even if you sell at a discount at a low point. This logical chain is only a market conjecture, and there is no confirmation from the parties or the regulatory level.

Who is more painful? The answer is a bit counter-intuitive: it is not the newly listed companies, but the ones that were listed earlier, have more appreciation, and have extremely low original costs.

Such "old money trusts" that have greatly appreciated after listing and whose cost base remains at a very early stage have the largest potential taxable income; those that have just been listed or even broken below the issue price with limited underlying appreciation have less tax burden pressure.

Of course, under the big net, there are still a lot of vague areas, and the announcement itself leaves a buffer — those who are unable to pay on time due to difficulties can pay in 5 equal installments within 5 years after filing with the tax authority.

But the buffer cannot change the direction of the rules.

After the deadline of the existing declaration window on October 22, the market expects that in the next few weeks to months, there may be more share reduction announcements from founders, family trusts and major shareholders of Hong Kong stocks and Chinese concept stocks.

04

Epilogue

In the past two decades, many domestic entrepreneurs have adopted the structure of "starting a business in the mainland, listing overseas, and placing equity in BVI/Cayman offshore trusts", and there were no special individual income tax rules for offshore trusts before.

After the implementation of Announcement No. 21, the tax obligation rules corresponding to this structure have been officially clarified. Those trust dividends and asset appreciation that previously lacked clear collection and management rules have for the first time clear tax declaration requirements.

Selling stocks is just the most easily visible step in this compliance liquidation.

This article is from the WeChat official account "Alpha Workshop Research Institute", written by Beichen, and published with authorization by 36Kr.