News
Cross-Border Tax Optimization and Asset Inheritance Trusts for High-Net-Worth Individuals
Ms. Zheng, a founder in cross-border trade, holds a Chinese passport and permanent residency in the UK, with a personal net worth of RMB 350 million.
(Holdings include RMB 200 million in equity of a domestic trading company, a London apartment worth RMB 100 million, and RMB 50 million in a Hong Kong private equity fund.)
Core Challenges:
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Fragmented global assets and complex tax filings – Involving tax regimes across China, the UK, and Hong Kong.
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Risk of double taxation due to differing tax systems – Leading to additional annual tax costs of about RMB 800,000.
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Cross-border inheritance burden – Her 25-year-old son resides in Australia, where future inheritance would be subject to up to 47% estate tax and foreign exchange controls.
Solution: Dual-Layer Family Trust Structure
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Offshore Layer (BVI) – Offshore trust established to hold the London apartment (RMB 100 million) and Hong Kong private equity fund (RMB 50 million), with a licensed offshore trustee.
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Onshore Layer (China) – Domestic family trust set up to hold 15% equity in the trading company (valued at RMB 30 million), with a licensed domestic trustee.
Operational Mechanism:
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Tax Optimization – Unified tax filing by the trustee leveraging tax treaties among China, UK, and Hong Kong; avoids double taxation, saving approx. RMB 650,000 annually.
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Cross-Border Allocation – Offshore trust transfers directly to Australia via partner banks, bypassing FX controls, to cover her son’s living and entrepreneurial expenses.
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Estate Tax Avoidance – London apartment and HK private equity fund held in trust, transferred by trustee without probate, bypassing Australian estate tax (savings estimated at over RMB 20 million).
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Centralized Asset Management – Trustees issue quarterly reports of global asset portfolios, enabling Ms. Zheng to adjust investment strategies. After her passing, onshore trust assets pass to her son, while offshore trust assets ensure long-term cross-border family support.
Achieved Through Family Trusts:
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Reduced Tax Burden – Minimized double taxation via cross-border tax treaties, enhancing returns.
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Smooth Cross-Border Succession – Avoided estate tax and FX restrictions for seamless inheritance.
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Centralized Asset Control – Dual-layer structure integrates fragmented domestic and offshore assets.
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Long-Term Family Protection – Offshore trust sustains multi-generational cross-border support.
