Personal Income Tax

General rules

There is currently no inheritance tax or gift tax in The People’s Republic of China (for this purpose, Hongkong SAR, Macau SAR and Taiwan are not included). The most important tax that high net worth individuals need to consider is personal income tax.

Individuals who have a domicile in China, or individuals who do not have a domicile in China but have lived in China for 183 days in a tax year, are considered resident individuals. Resident individuals shall pay individual income tax in accordance with the law on income obtained from within or outside China.

Individuals who have no domicile in China and do not live in China, or individuals who do not have a domicile in China but live in China for less than 183 days within a tax year, are considered non-resident individuals. The income obtained by non-resident individuals from China shall be subject to personal income tax in accordance with the law.

Tax rates

The individual income tax is levied on the worldwide income obtained by resident individuals during a calendar year. Income tax rate is divided into three groups:

• for consolidated income (including income from wages and salaries, remuneration for personal services, author's remuneration and royalties), progressive tax rates ranging from 3% to 45% shall apply;
• for income from business operations, progressive tax rates ranging from 5% to 35% shall apply; and
• for income from interest, dividends and bonuses, income from lease of property, income from transfer of property and incidental income, a proportional tax rate of 20% shall apply.

Tax declaration when emigrating

As newly introduced in the Individual Income Tax Law of the PRC (Amended in 2018), if a Chinese resident is to deregister his/her household registration for emigrating overseas, he/she shall make the tax declaration.

Enterprise Income Tax

General rules

If a corporate structure is used under trusts or foundations, enterprise income tax shall be considered. As provided under the Enterprise Income Tax Law of the PRC (Amended in 2018), except for wholly individually-owned enterprises and partnership enterprises, enterprises and other organisations that obtain income within the People's Republic of China shall pay enterprise income tax.

Enterprises are divided into resident enterprises and non-resident enterprises. “Resident enterprises" are those set up in China or set up in accordance with the law of the foreign country (region) but whose actual administrative institution is in China. "Non-resident enterprises" are enterprises that are set up in accordance with the law of the foreign country (region) with actual administrative institutions outside China but which have set up institutions or establishments in China or, without institutions or establishments set up in China, have income originating from China.

Resident enterprises shall pay enterprise income tax in relation to their income originating both within and outside China. Non-resident enterprises that have set up institutions or establishments in China shall pay enterprise income tax in relation to income originating from China obtained by those institutions or establishments, and income occurring outside China but having an actual connection with such institutions or establishments. Non-resident enterprises that have not set up institutions or establishments in China, or have set up institutions or establishments but the income obtained by the said enterprise has no actual connection with such institutions or establishments, shall pay enterprise income tax in relation to their income originating from China.

Tax rates

The rate of enterprise income tax shall be 25%. In respect of non-resident enterprises that have income derived within China, the applicable tax rate shall be 20%.

There is no wealth tax, inheritance tax or gift tax in China. The Individual Income Tax law provides several categories of individual income that shall be exempted from individual income tax, with insurance indemnities being included.

General Rules

Both businesses and individuals are charged income tax in China. In recent years, the Chinese tax authorities have adopted a series of measures to supervise the declaration, collection and payment of income tax. At the same time, regulators are adopting technological means to establish a modern tax collection and management system. Against this background, the space for income tax planning in China is becoming increasingly limited.

In general, a case-by-case approach would be preferred for tax planning.

Tax Treaties

For individuals and enterprises that have income derived within China and overseas, the tax treaties may provide some tax planning space; for example, income tax that has been paid outside China may be offset from the payable tax of the current tax period.

Welfare Donation deduction

When computing taxable income, the portion within 12% of the total annual profit may be deducted for public welfare donations incurred by an enterprise, and the portion in excess of 12% thereof may be carried forward to be deducted in the following three years. The portion of donations by an individual of his/her income to education, poverty alleviation or other public welfare and charitable undertakings which does not exceed 30% of his/her declared taxable income amount may be deducted from his/her taxable income amount; where the full amount of donations to public welfare and charitable undertakings are tax deductible under stipulations of the State Council, such stipulations shall prevail.

Restrictions on Non-citizens Purchasing Real Estate

There are relatively strict restrictions on non-citizens acquiring real estate in China. Each non-citizen is restricted to the purchase of only one residential house for self-occupancy purpose, subject to the condition that such non-citizen has obtained the relevant work certificates and residence certificates within China.

Taxation on Real Estate Transaction

There is currently no special taxation policy with respect to real estate owned by non-citizens. Most of the taxes are collected at the transaction stage, such as individual income tax, value-added tax, land value increment tax, deed tax and stamp tax. The specific tax rate varies as the type of the real estate being transacted is different. In certain circumstances, the individual income tax could be exempted subject to local regulations.

Individual income tax will be apply with respect to rents received by the real estate owner.

Legislation Trend

The Ministry of Finance has been carrying out real estate tax reform pilots in various places in recent years, including investigations and preliminary studies in some cities such as Shanghai and Shenzhen, especially for high-end residences and newly purchased residences. Considering the sluggish domestic real estate transaction market and other factors, the government has not further expanded the scope of pilot cities for real estate tax reform after 2022.  As the unified registration of real estate has been realised in China in 2023, it is generally believed that the foundation for the collection of real estate taxes is in place.

At the time of writing, there are no known impending changes to the legal or tax systems in China that are likely to affect tax and estate planning in China in the near future. However, due to the authorities’ call for common prosperity, including the reduction of inequality in wealth distribution and narrowing the poverty gap, there have been discussions on the imposition of inheritance tax and gift tax in China. In view of this uncertainly, estate planning structures such as on-shore and off-shore family trusts, charitable trusts, life insurance policies, etc. are considered by high net worth individuals.

Common Reporting Standard (CRS)

Since China promised to implement the automatic exchange of information standard at the G20 meeting of finance ministers and central bank governors in 2014, the State Administration of Taxation has actively participated in the Global Forum on Tax Transparency and Information Exchange, and promoted the implementation of the Multilateral Convention on Mutual Assistance in Tax Administration and Standards for Automatic Exchange of Financial Account Tax Information. China has successively carried out several revisions to the domestic legislative framework of CRS.

As early as 2015, China joined the Multilateral Convention on Mutual Assistance in Tax Administration, signed the Agreement among Multilateral Competent Authorities and subsequently issued the Administrative Measures for the Due Diligence of Non-resident Financial Account Tax-Related Information, the Detailed Rules for the Due Diligence of Non-resident Financial Account Tax-Related Information of Banking Deposit Financial Institutions and the Regulations for the Reporting of Non-resident Financial Account Tax-Related Information. These provide preliminary framework regulations for identifying, collecting, reporting and exchanging tax-related information about non-resident financial accounts.

In recent years, China has been sending relevant information to partner countries (regions). According to the automatic information exchange mechanism under the CRS framework, Chinese tax authorities will also receive relevant financial account information regarding Chinese tax residents from partner countries (regions).

Foreign Account Tax Compliance Act (FATCA)

The Chinese government substantially reached an IGA (Agreement in Substance) with the United States in 2014, and has chosen the Model 1 IGA as the method of information disclosure. But as of the time of writing, this substantive IGA text has not been released publicly, and China and the United States have not officially signed it. Due to the absence of bilateral agreements, the compliance requirements of FATCA have not been adopted in the domestic laws of China.

China's reform and opening up gave rise to the first group of high net worth families, the majority of which are entrepreneurs. The continuous growth of China's economy has brought about the rapid accumulation of high net worth families and their wealth. Under the influence of history and culture, blood relatives and in-laws are intertwined in traditional Chinese large families, which makes the identity relationship, property relationship and emotional relationship in large families complicated.

Chinese culture is deeply influenced by Confucian philosophy. Many traditional cultural factors can still be seen in today's wealth inheritance arrangements, including the embodiment of men's superiority over women and the encouragement of childbearing. However, the traditional blood lineage inheritance model is gradually being diversified, and issues of fairness and sustainability are being considered. People realise that inheritance of wealth is not only the transfer of property, but also the management and prevention of risks. Therefore, many families are more likely to employ effective legal and financial tools, such as life insurance policies, wills and trusts, to reduce potential disputes and risks.

Although high net worth individuals remain increasing concerned about overseas investment and global wealth inheritance planning, foreign exchange controls make such planning complex.

When designing global wealth inheritance structures for high net worth families, at least some of the following factors shall be considered:

• The citizenship/tax residence status of the deceased and their beneficiaries. These factors may lead to the application of foreign inheritance tax and gift tax rules, and may also cast influence on the jurisdiction and application of inheritance laws. Also, in the circumstance where a PRC citizen has non-citizen successors, there’s a chance for those non-citizen successors to transfer the estate overseas in accordance with certain foreign exchange administrative measures.
• The jurisdiction of the estate. It is recommended to apply the laws of the situs of the estate when planning, especially for real estate.

In case the deceased or their beneficiaries are married, the above-mentioned factors related to his/her spouse should be considered as well.

In the strict sense, there are no special forced heirship laws in China. However, there is a similar rule under the Civil Code of the PRC which provides that “the reservation of a necessary portion of an estate shall be made in a will for a successor who has neither the ability to work nor a source of income.” If not, the court may allocate in the judgement a portion of the estate to successors who have neither the ability to work nor a source of income.

In the practice area, high net worth families may resort to special need trusts or senior care trust structures to solve the special/senior care needs of family members. But there is no provision under the laws and regulations if such kinds of trusts or insurance arrangements could preclude the application of the rules mentioned above.

Any property acquired by a couple during their marriage is community property, unless otherwise provided by law or agreed by both parties. The husband and the wife enjoy equal rights in the disposal of their community property, and neither party may transfer such property without consent.

The spouses may agree in writing that their premarital property and the property to be acquired by them during their marriage may be owned by them separately or jointly, or partially owned separately and partially owned jointly. The agreement on their premarital property and the property acquired during the marriage is legally binding on both parties to the marriage. Where the spouses agree that the property acquired during the marriage is to be owned separately, a debt incurred by one of the spouses shall be paid off with his/her separate property to the extent that the third party concerned is aware of such an agreement.

Additionally, as an agreement for determining the property ownership of (quasi-)husband and wife, a prenuptial or postnuptial agreement shall meet the following conditions:

• the expression of common intentions is made by the parties to the agreement on the basis of equality and voluntariness;
• any content of the agreement does not violate the mandatory provisions of laws and regulations or the public order and good morals of China;
• the scope of property stipulated by the agreement must be the legitimate property that is currently existing or may be acquired by the parties in the future, and shall not infringe upon the legitimate rights and interests of any third party;
• the agreement shall be in writing and specific; and
• the agreement shall not contain any content restricting the legitimate rights and interests of the other party such as the interference of marriage.

Transfer at Death

Given that there are no inheritance tax or gift tax rules in China, real estate and business equities transferred at death will only be subject to stamp tax in China. Deed tax will also apply in the event that real estate is inherited by successors who are not heirs apparent, as stipulated by the Civil Code. For other properties, such as cash, financial assets, collections, etc., most may transfer to the successor without paying tax.

If the successors transfer the property they inherited, the original cost of the property that the deceased had paid (including tax and reasonable costs and expenses) could be deducted when calculating the personal income tax to be paid.

Transfer During Life

In general, unless an individual transfers his/her real estate or business equities to his/her close relatives by gift, individual income tax will be applied based on the balance between the fair market value or the agreed purchase price (whichever one is higher) of the property being transferred and the original value of the property.

There is currently no inheritance tax or gift tax in China, but the possibility of future levies has never been ruled out. High net worth families are willing to employ tools such as life insurance, trusts and charity foundations to plan their succession. Due to the development of the family trust business, both from a regulatory and cultural perspective, families are inclined to use family trusts to transfer cash, financial assets and business equities to younger generations to control disputes and the potential tax risks.

The Civil Code of the PRC offers a legal basis and appropriate interpretation for protecting and inheriting virtual property. While there are no explicit legal provisions concerning the inheritance of digital assets in China, the Data Security Law, the Personal Information Protection Law, the Opinions of the CPC Central Committee and the State Council on Establishing a Data Base System to Maximize a Better Role of Data Elements, along with the stance of certain courts in determining the property nature of digital assets, indicate that laws, regulations, and policies in China do protect and encourage the lawful transfer of digital assets with lawful property attributes.

In practice, the inheritance of digital assets and wealth can be facilitated through agreements or trust instruments. However, for virtual currency, China has issued a series of policies and measures that clearly indicate that virtual currency is not legal tender, and citizens are prohibited from engaging in or participating in digital activities unless the digital currency is licensed by the state. This brings uncertainty to the legality and inheritance of virtual currency.

In China, trusts are often used for inheritance planning, while foundations can be used for tax planning purposes.

Trusts

There are no special regulations on how to tax a trust entity in China. It is difficult to draw a clear conclusion on how to use trusts to legally carry out tax planning. However, in view of the advantages of flexible distribution and the privacy protection of trusts, trusts are gradually gaining notice and acceptance by the public in terms of wealth inheritance planning.

After the State Administration of Financial Supervision issued the Notice on Regulating the Classification of Trust Companies in 2023, wealth management service trusts（such as family trusts, special needs trusts, insurance trusts, testamentary trusts, personal wealth management trusts, etc.）have flourished in China. Issues related to the trust registration system and the trust taxation system may be solved in the future.

Foundations

Many entrepreneurs have set up charitable foundations in China. As discussed in 10.1 Charitable Giving, by making public welfare donations to foundations, individuals or enterprises can enjoy certain income tax benefits every year.

Trusts are recognised and protected by law in China. PRC laws and judicial practice stipulate that trust property is independent, and the settlor can establish a trust in the form of a trust contract or a will. The promulgation of the Trust Law in 2001 formally established the trust system in the PRC, and now the trust industry has become an important part of the entire financial system.

Under the Trust Law of the PRC, both individuals and legal entities may act as fiduciaries. However, since there are no specific rules with respect to circumstances where a fiduciary is not a licensed trust company, in practice, licensed trust companies act as the fiduciary. As regulated by the financial supervisory authority, trust companies are not allowed to serves as a fiduciary in a foreign trust. There is no specific provision in China that prohibits non-financial legal entities or individuals from serving as the fiduciary of a foreign trust.

In addition, the Trust Law of the PRC allows the fiduciary to benefit from the trust; nevertheless, the fiduciary may not be the sole beneficiary of the trust.

Regardless of whether it is a trust established in China or a foreign trust, Chinese tax law has no clear regulations on how to tax the income derived from properties held under trust by a fiduciary. Theoretically, distributions made from the trust to beneficiaries are subject to income tax, but supporting tax declarations and collection measures have not been formulated yet.

In China, trusts are not categorised as revocable or irrevocable. The legal consequence of irrevocable trust is established by provisions in the trust agreement, such as the settlor shall not unilaterally terminate the trust without the consent of the trustee.

With respect to the wealth management trust, the settlor is generally allowed to retain various powers, often including the powers to direct the investment of all or part of the trust property, to add or exclude persons as the beneficiary, to alter the distribution plans or to amend or modify other factors of a trust. The settlor is also entitled to appoint the trust protector or other designated persons to exercise the authorised powers on behalf of the settlor after his/her death. Although there has been no judicial precedent determining that the reservation of powers of investment, distribution or management by the settlor will invalidate a trust, to reduce fiduciary liability, the trustee usually reveals the risk in the trust document that retaining broad rights by the settlor may have adverse effects.

Asset protection methods commonly used in China include:

Family Trusts

It is provided by the Trust Law that trust property is different from other properties with which the settlor hasn't created a trust. After the trust is created, in the event that the settlor of the trust dies, the trust shall continue to exist and the trust property shall not be deemed as the settlor’s estate. Nevertheless, if the settlor is the only beneficiary of the trust without a successor beneficiary, the trust property will be part of the settlor’s estate. Also, the creditors of the settlor, the trustee and the beneficiary, may not claim against the trust property in most circumstances.

Additionally, family trusts duly established in China with trust companies as fiduciaries are supervised by the National Financial Regulatory Administration. Each family trust is registered by the China Trust Registration Co., Ltd. Assets held under each trust are required to be managed in separate trust accounts so that the independence of the trust's assets can be guaranteed. It is provided by the Trust Law that the trust property is independent from other properties and liabilities of the settlor, and the trust property shall not be enforced by the creditors of the settlor unless otherwise provided by law.

Since there are legal obstacles for family trusts established within China to hold assets or invest overseas, families prefer to set up offshore trusts to hold their overseas assets.

Life Insurance

Considering the nature of insurance indemnities, life insurance has been widely used to protect personal assets from future creditors, and to avoid the division of assets when facing divorce or succession disputes.

Limited Lability Companies and Limited Liability Partnerships

Limited liability companies and limited liability partnerships are often used to hold and operate businesses due to the  independence of the corporate legal entity and the advantages of limited liability assumed by the shareholder/partner. Limited liability companies and limited liability partnerships can protect personal assets from the creditors of the business.

Generally speaking, wealthy families in China may take multiple strategies and structures to pass wealth and control to the next generation, including among others, prenuptial or postnuptial agreements, wills, family charters, trusts and family offices.

A family trust is a good way to preserve the family's wealth by separating the management power and the ownership of the property. In China, the “family trust + limited liability partnership” structure is mostly used for family business succession plans. By doing so, the management right could be passed to the pres-selected successors of the next generation, or all or most of the descendants could benefit from the trust. In a more complex structure, family offices or committees may serve as the general partner to assist with the management of the family's business.

In general, the fair market value of the asset being transferred will not be adjusted when the asset is partially transferred.

Disputes regarding estates commonly arise as the deceased did not leave a will or the will is unclear. The majority of the causes of action are legal inheritance disputes and testamentary inheritance disputes. The judicial system has been promoting diversified solutions to such inheritance conflicts and disputes. Courts and other social autonomous organisations tend to use mediation to facilitate the resolution of family conflicts. In case mediation fails, court judgments will be adopted.

As family trusts have not commonly been used until recently, disputes regarding trusts are still limited in China.

The relief that the court provides to parties depends on the nature of the litigation. For example, in divorce disputes, the party found to be at fault shall bear a certain liability.

In disputes involving trusts, the trustee may be liable for damages for failure to fulfill fiduciary duties. If the trustee disposes of the trust property in violation of the purpose of the trust, or causes losses to the trust property due to violation of management duties or improper handling of trust affairs, the settlor has the right to apply to the people's court to revoke the disposition, and has the right to request that the trustee restore the original state of the trust property or to claim compensation.

Although the Trust Law stipulates that both individuals and corporations can serve as the trustee, at present, corporate fiduciaries with trusts operating licenses are more prevalent in the practice of wealth management trusts in China. Compared with individual fiduciaries, professional corporate fiduciaries are regulated by specific financial supervision departments and are therefore preferred to maintain the long-term stability of a trust.

Based on the provisions of the law, whatever the trustee is, it must fulfil its duties and perform the obligations of loyalty, credibility, prudence and effective management in the interests of its beneficiaries.

The Trust Law expressly provides that, if the trustee violates the purpose of the trust by disposing of the trust property, or causes losses to the trust property due to wilful and wrongful conduct, the settlor is entitled to request the court to revoke the disposition, and request the trustee to restore the trust property or to make compensation.

It is possible to provide for an exemption of fiduciary duty in the trust documents, which shall not conflict with the legal provisions and shall be clearly indicated with remarkable fonts or symbols.

In respect of the investment of trust property, trustees are still subject to the fiduciary duties as explained in 6.1 Prevalence of Corporate Fiduciaries. In practice, the settlor is usually allowed to provide specific guidance or direction on the investment and management of trust property. However, in the absence of any such guidance, the trustee has to perform the duty of investment after taking into consideration the terms of the trust and its purpose. It is of vital importance that, whether the settlor gives the direction or not, the investment of trust property must be consistent with the settlor's ability to bear the risk.

Currently, the trust industry in China is undergoing a transitional phase. Regulatory authorities classify business trust products into three categories: asset service trusts, asset management trusts and public welfare trust/charitable trusts.

Regarding asset management trusts that have the nature of privately offered funds, the trustee is required to diversify risks by portfolio the trust property. However, specific requirements regarding the type, proportion, quantity and other aspects of the asset portfolio have not been clearly defined yet, and further clarifications are expected through supporting rules.

In the case of asset service trusts, the wealth management trust products are customised by the trustee based on the needs of the trustors. The trust contract clauses, management methods and time limit are formulated accordingly, emphasising “segregated account services”, offering strong customisation and flexibility. Trust property may include equity, partnership shares and fund shares, and the trustee shall manage and operate the commercial entity as agreed upon in the trust documents.

In practice, there are distinct differences in asset management requirements between trusts and funds. Trusts can be classified into two management modes: fully entrusted and partially entrusted. In fully entrusted mode, the trustee proactively makes decisions and manages the investment subject on behalf of trust products. In partially entrusted mode, the trustee operates the investment subject following instructions from the trustor, beneficiary, investment advisor or other entities. Conversely, funds are typically managed solely by the fund manager. These differences result in varying governance models for commercial entities.

Domicile

According to the Chinese tax law, having a domicile in China refers to a habitual residence in China due to household registration, family and economic interests. Habitual residence is a legal criterion for determining whether a Chinese taxpayer is resident or non-resident, and does not refer to the actual residence or the place of residence within a certain period of time.

Residency and Citizenship

Foreign nationals or stateless persons who are willing to abide by the Chinese Constitution and laws and who meet one of the following conditions may be naturalised upon approval of their application:

• they are near relatives of Chinese nationals;
• they have settled in China; and/or
• they have other legitimate reasons.

Generally speaking, obtaining the right of permanent residence in China is one of the prerequisites for applying for Chinese citizenship. A foreigner's permanent residence in China means that foreigners can stay in China for an unlimited period of time. Foreigners applying for permanent residence qualifications can be divided into investment categories, employment categories, special contribution categories and relatives’ dependent categories.

Unless the government has special needs for talent introduction, there is no shortcut for individuals to obtain citizenship in China, and all applicants need to meet the citizenship standards stipulated in the relevant regulatory requirements. For foreigners with high academic qualifications (such as doctoral degrees), and in the Guangdong-Hong Kong-Macao Greater Bay Area and some other regions, there are special policies to gradually expand the path for foreigners to apply for permanent residence qualifications, and there is a trend of gradually relaxing the requirements for applying for and obtaining permanent residence qualifications.

There are mechanisms for minors and adults with disabilities. Typically, a special needs service trust is used in these cases. This kind of trust is oriented to special needs groups and their families, with the main purpose of meeting the living needs of people with mental disabilities over a long period. In practice, the trust can combine with insurance policies and special needs services, thus involving the trust company, insurance company, people with special needs and their families, and various social services agencies. Through the joint efforts of various participating parties, the special needs service trust provides a new way for solving living quality, property safety, service professionality and sustainability issues for people with special needs.

In accordance with the provisions of the Civil Code, a guardian can be determined as a parent who is the guardian of his child who may, in his will, designate a succeeding guardian for their child. Where the parents of a minor are deceased or incompetent to be their guardians, the following persons, if competent, shall act as the minor's guardians in the following order:

• the minor's paternal grandparents and maternal grandparents;
• the minor's elder brothers and sisters; or
• any other individual or organisation that is willing to act as the minor's guardian provided that consent must be obtained from the residents' committee, the villagers’ committee or the civil affairs department in the place where the minor's domicile is located.

For an adult who has no or limited capacity for performing civil juristic acts, the following persons, if competent, shall act as the individual's guardians in the following order:

• the individual's spouse;
• the individual's parents and their children;
• any other close relatives of the individual; or
• any other individual or organisation that is willing to act as a guardian provided that consent must be obtained from the residents' committee, the villagers’ committee or the civil affairs department in the place where the adult's domicile is located.

An adult with full capacity for performing civil juristic acts may, in anticipation of incapacity in the future, consult their close relatives or other individuals or organisations willing to be their guardian, and appoint in writing a guardian for themselves, who shall perform the duties of guardian when the adult loses all or part of the capacity for performing civil juristic acts.

Where a dispute arises over the determination of a guardian, the guardian shall be appointed by the residents’ committee, the villagers’ committee or the civil affairs department in the place where the ward’s domicile is located, and a party not satisfied with such an appointment may request the people’s court to appoint a guardian; the relevant parties may also directly request the people’s court to make such an appointment.

The old age security system in China consists of three pillars:

The first pillar is basic endowment insurance, including basic endowment insurance for employees and for urban and rural residents. Under this system, employers and employees both have to pay insurance premiums at a rate of 16% and 8% respectively based on the monthly salary of the employee. Once the employee reaches the retirement age stipulated by the law or quits their jobs due to other reasons, the social insurance agencies will pay the pension and other benefits to them to guarantee their basic quality of life.

The second pillar is enterprise annuity and occupational annuity, which is a supplementary pension insurance system independently established by enterprises and their employees, or by government agencies and institutions and their staff, on the basis of participating in the basic endowment insurance.

The third pillar is the personal pension system, which is established based on the Opinions on Promoting the Development of Personal Pensions promulgated by the State Council in 2022. Both employees and urban and rural residents in China can voluntarily participate in the personal pension system, and the payment is entirely borne by the participants themselves, to a maximum of CNY12,000 per year. Individuals can independently choose to purchase financial products such as savings deposits, wealth management products, commercial pension insurance  and public funds, and can enjoy preferential tax policies in accordance with the relevant regulations.

Children Protection

According to the Civil Code, children born out of wedlock are entitled to the same rights as children born in wedlock. No organisation or individual may harm or discriminate against them. In cases where the natural father or mother does not have custody of the child born out of wedlock, they are required to pay child support for the child or an adult who is unable to live independently. As a result, the legal system in China upholds the fundamental principle of equal legal protection for all children. Regardless of whether they were born in wedlock or not, or whether they were surrogate or adopted children, they are protected by law and have the right to be beneficiaries of a trust.

Surrogate Pregnancy

At present, surrogacy is not permitted in China, and several regulations explicitly prohibit it, including circulars from various ministries related to the issuance of the Work Plan for Combating Surrogacy. The most effective regulation in this regard is the Administrative Measures for the Technologies of Human Assistive Reproduction, which mainly imposes penalties on medical institutions involved in surrogacy. In this context, some individuals may still opt for illegal surrogacy through underground channels or seek surrogacy arrangements abroad.

In China, the legal recognition of marriage in the LGBTQ+ community has not been established, despite the evident need for provisions regarding pension, medical care, wealth inheritance and other important aspects in same-sex relationships. Consequently, LGBTQ+ groups often opt to register their marriages abroad, notarise guardianship agreements in China or try to establish trusts to define their personal and property relationships with their same-sex partners. In practice, Chinese embassies and consulates abroad may refuse consular legalisation for same-sex marriage documents due to the non-recognition of same-sex marriages within China's laws and regulations.

As stated in the Civil Code, an adult with full capacity for civil conduct may determine their guardian in writing by consulting with close relatives or other individuals or organisations willing to act as guardians. In the event that the adult loses all or part of their capacity for civil conduct, the designated guardian shall assume the duty of guardianship. This provision allows the LGBTQ+ community to entrust their partners to be their future guardians through a guardianship agreement. Therefore, if they lose their capacity for civil conduct, their partners have a legal basis to exercise their civil rights and fulfill the duties of guardianship on their behalf.

Although the notarisation of voluntary guardianship can help address practical obstacles for same-sex couples in areas such as pensions and medical care to some extent, it does not fully resolve the issue of wealth inheritance. Consequently, additional planning through a combination of tools such as gifting, wills, life insurance, domestic trusts and offshore trusts is recommended to protect the rights and interests of same-sex couples.

Under the goal of common prosperity, China pays more attention to the positive role of charitable giving in regulating distribution and encourages individuals and enterprises to carry out charitable giving. Individuals and businesses may receive tax benefits for donations, the details of which are discussed in 1.3 Income Tax Planning.

In China, the Charity Law of the People's Republic of China offers several avenues for charitable activities and donations. These paths include charitable trusts and charitable activities conducted by charitable organisations. Charitable organisations can take the form of foundations, social groups, social service organisations, and other types of entities.

Foundations, as non-profit legal entities, have relatively stringent establishment requirements. The management mechanisms, including the proportion of mandatory expenditures and operating costs for charitable activities, as well as the tax incentive system, have been clearly stipulated for foundations. On the other hand, charitable trusts offer more flexibility in their setup and benefit from legal protection through the trust system.

In summary, China offers diverse avenues for carrying out charitable and donation activities, encompassing both charitable foundations and charitable trusts. Each has its unique characteristics and legal frameworks, providing various options for individuals and organisations to participate in philanthropic endeavours.