appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

hooksArticlePageFloatingButtonConfigArticle

appConfig

filter

json

liveArticle

Emma Ma

For Michelle Zhao, a Shanghai resident, offshore trusts had long appeared to be the preserve of people far wealthier than herself. That assumption was upended two weeks ago when she received a “baffling” text message from the Hongkou district branch of the Shanghai Municipal Tax Service.
“The message said I might have taxable gains stemming from offshore trusts that I was required to declare. Yet I have never held any form of trust. I assumed the message was sent to me by mistake, so I ignored it at first,” she recalled.
A few days later, the tax administration followed up with a phone call, shedding light on the SMS: the alert was linked to Zhao’s Hong Kong Mandatory Provident Fund (MPF) account.
She explained to the tax officer that the account had been set up by her former employer in 2022 when she worked in Hong Kong, and she had no trust holdings. “The officer said he would record my statement, and nothing further,” Zhao said.
Her experience is far from unique, with multiple posts describing confusion over similar tax notices surfacing on the Chinese social media platform RedNote.
A Beijing-based user of the platform, posting under the handle @Will, said he, too, had been contacted by local tax officials by text message and phone about potential offshore trust gains. Like Zhao, he had previously worked in Hong Kong.
In his case, the inquiry also led back to an MPF account. Beijing tax officials emailed @Will a form requiring him to explain the account, sign the form and affix his fingerprint.
So why are MPF accounts, a type of pension fund, being flagged by mainland tax authorities as offshore trusts?
According to the Mandatory Provident Fund Schemes Authority (MPFA), master trust schemes are the most common type of MPF plan. They pool contributions from multiple employers and scheme members for consolidated administration and investment, harnessing economies of scale.
That structure may be at the root of the confusion: the word “trust” appears in the official name of the retirement schemes.
It is difficult for local officials to determine whether MPF accounts constitute offshore trusts or simply retirement savings, so taxpayers are expected to clarify on their own
Ge Yuyu, Shanghai National Accounting Institute
“Under the Common Reporting Standard, information on MPF accounts is [shared with] mainland tax authorities, where the accounts are categorised as trust-related holdings,” said Ge Yuyu, an associate professor at the Shanghai National Accounting Institute.
“It is difficult for local officials to determine whether they constitute offshore trusts or simply MPF retirement savings, so taxpayers are expected to clarify on their own,” he added.
Beijing has tightened scrutiny of overseas assets over the past two years, extending its tax net to offshore trusts, returns on cross-border insurance policies and overseas share investments as domestic tax and land-related revenues soften.
In July, the Ministry of Finance and the State Taxation Administration for the first time set out detailed provisions addressing individual income tax on offshore trusts. The rules apply a uniform 20 per cent rate to relevant taxable income at each stage of a trust’s life cycle: the transfer of assets into the trust, income earned during its operation, and its eventual wind-up.
Ye Yongqing, a tax lawyer at Beijing-based Anli Partners, said trusts and MPF schemes had similar legal structures, which could explain why MPF accounts were being categorised as trusts under the tax system.
Ge said tax authorities could readily verify whether an MPF pension account was involved by requiring supporting documents from the scheme provider.
According to Hong Kong’s Inland Revenue Department, since 2020, MPF schemes have fallen within the definition of a reporting financial institution and no longer qualify for exemption.
Both Ye, the lawyer, and Ge, the professor, said MPF accounts enjoyed tax-exempt status and were not subject to the tax framework for offshore trusts.
The MPFA also notes on its website that “upon withdrawal of MPF by scheme members, the sum derived from mandatory contributions is not taxable”.


4 mainland Chinese firms jump into cooling Hong Kong IPO market

Geopolitical risks see institutional investors rush to stockpile cash, survey finds

Mainland China’s stock exchanges mount charm offensive amid Hong Kong IPO boom

For China’s hi-tech IPOs, it’s Hong Kong vs the mainland – but how much does it matter?

Banking & finance

Mainland Chinese tax drive flags Hong Kong MPF accounts as offshore trusts

China’s Ministry of Finance, along with the State Taxation Administration, issued detailed rules this year governing individual income tax on offshore trusts, with some Hong Kong MPF accounts now mistakenly caught up in the tax drive. Photo: VCG via Getty Images

New York City’s rich Chinese grapple with Beijing tax rules as enforcement deadline nears

Illustration: Lau Ka-kuen

Mainland Chinese investors to drive Hong Kong wealth boom despite new tax rules: report

Mainland China’s share of local assets under management is projected to reach 68 per cent from 59 per cent within five years, according to a report released by the Hong Kong Association of Banks and Deloitte China. Photo: Jelly Tse

Expand Hong Kong’s MPF investment choices, lure mainland pension funds: financial council

The eMPF mobile app is the central electronic platform for managing Mandatory Provident Fund schemes in Hong Kong. The Financial Services Development Council suggests allowing a portion of MPF funds to be invested in more asset classes and infrastructure. Photo: Handout

FSDC executive director Rocky Tung Yat-ngok speaks at a press briefing on Tuesday. Photo: Kit Lai

China’s wealthy used grey zones to avoid taxes. Have new rules painted them into a corner?

As mainland China tightens its tax rules, can Hong Kong remain a magnet for billionaires?

 Illustration: Dennis Yip

Economy

China Economy

Policy

As Beijing tightens tax collection, some mainland residents who previously worked in Hong Kong are being asked to explain their MPF accounts


As Beijing tightens tax collection, some mainland residents who previously worked in Hong Kong are being asked to explain their MPF accounts.


Mainland Chinese tax drive flags Hong Kong MPF accounts as offshore trusts

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}As Beijing tightens tax collection, some mainland residents who previously worked in Hong Kong are being asked to explain their MPF accounts

As Beijing tightens tax collection, some mainland residents who previously worked in Hong Kong are being asked to explain their MPF accounts