China Targets Offshore Trusts Used by Nigeria’s Rich to Invest Abroad
By Aboki Forex —
Chinese tax authorities are tightening the screws on offshore trusts that hold shares in Hong Kong-listed companies. The move targets a structure long used by the country’s ultra-wealthy to move billions of dollars overseas.
Officials in provinces and cities including Jiangsu and Shenzhen have demanded that trust owners report detailed financial information. This includes investment gains from dividends and share sales, according to people familiar with the matter. In Shanghai, similar demands for three years of income data began in early 2025.
In one case, a local tax bureau tried to impose a 20% levy on investment gains plus additional penalties. Another province is asking for disclosure of income from offshore trusts over the past two years. The State Taxation Administration has not commented.
The crackdown targets a gray area in tax enforcement. Offshore trusts have been popular vehicles for shareholders of companies seeking Hong Kong listings. They were largely hidden from mainland tax authorities. Now, some corporate owners are hesitant to use these structures for upcoming Hong Kong IPOs.
Clifford Ng, managing partner of Zhong Lun Law Firm in Hong Kong, said many founders put shares into trusts for succession planning. But those doing it for tax reasons need to think twice. Many hold stakes worth billions of dollars.
China is facing a sluggish economy and widening budget deficit. The government is looking for new tax revenue. Personal income tax revenue jumped 11.5% last year to a record 1.62 trillion yuan. Authorities have already targeted the ultra-rich and are now expanding scrutiny to less wealthy individuals.
The crackdown also affects red-chip listings. These allow Chinese firms to sell shares in offshore entities that hold mainland assets. China Mobile and Cnooc are among the companies that used this route. The China Securities Regulatory Commission has moved to restrict such listings this year, citing a need for transparency.
It remains unclear how far back tax inspectors will trace income or if penalties will apply. The move creates significant uncertainty for China’s mega-rich. Chinese officials have also taken a tougher stance on capital outflows, including removing two leading cross-border online brokerages from mainland app stores.