Individual income tax revenue grows 90%: Is cryptocurrency taxation still far away?

Author: Liu Honglin, Mankun Blockchain Legal Services

Today I saw a news report from Cailian Press, and honestly, the numbers still caught me off guard.

The State Taxation Administration announced that the 90-day transition period for taxing offshore trust income has smoothly concluded. Cumulative personal income tax declarations for offshore trusts have exceeded RMB 160 billion, with over RMB 120 billion collected in tax revenue in October alone, directly driving a nearly 90% increase in national individual income tax revenue for the month.

One month, 120 billion RMB. This isn't the result of a pilot city; it's nationwide. In other words, money that had quietly sat within offshore structures for years has finally been called out to make up past tax payments.

Why HK-listed Bosses Are Rushing to Raise Funds

If you've been following the Hong Kong stock market, you've likely noticed a trend over the past few months: many company founders and actual controllers are aggressively raising capital. Some are pledging shares, others are selling down holdings directly, and some are even taking bridge loans.

Where did this money go? A significant portion was used to pay this offshore trust income tax.

On July 24 this year, the Ministry of Finance and the State Taxation Administration issued an announcement stipulating that taxpayers receiving offshore trust income must complete their declarations and payments within a 90-day transition period without incurring late fees. Put simply: you are given three months to voluntarily settle what you owe, and past non-compliance will be forgiven. After this window closes, late fees, audits, case filings, and public exposure will all follow without exception.

Looking back now, the design of this transition window proved highly effective. The vast majority of taxpayers chose to comply, and the 120 billion RMB collected serves as the best proof. Those who rushed to raise funds before the deadline didn't suddenly turn bearish on their own stocks; they made a clear calculation: it's better to work with tax authorities than to race against them.

In 2026, Cross-Border Tax Is the Core Theme

If you map out the regulatory trajectory domestically this year, a clear pattern emerges: taxes, particularly cross-border ones, are an inescapable theme for 2026.

In May and June, Futu and Tiger were investigated for cross-border securities business, exposing the market to an initial shock. Following that came this round of offshore trust taxation. Next, the funding nature and reporting obligations of Hong Kong insurance products have been repeatedly discussed. Even cryptocurrencies are in focus, with tax authorities already monitoring the channel of transferring assets abroad through crypto assets.

In the past, when discussing cross-border assets, regulators effectively turned a blind eye to some extent: not because they didn't care, but because enforcement wasn't a top priority and tools were limited. But starting this year, those eyes are wide open. From securities accounts to trust structures and on-chain assets, scrutiny is tightening layer by layer.

There Are No More Secrets in Accounts

Why could this collection be so precise? Because technologically, traditional offshore arrangements have long ceased to hold any secrets.

Under the CRS (Common Reporting Standard) framework, China mainland and over 100 jurisdictions globally automatically exchange financial account information every year.

Your bank and securities accounts in Hong Kong, Singapore, and the Cayman Islands—balances, yields, and beneficial owner identities—are essentially transparent to domestic tax authorities. The notion that "offshore trusts are hidden overseas and impossible to audit" became obsolete long ago in the CRS era.

More notable is what comes next. Starting in January 2027, Hong Kong will join the CARF (Crypto-Asset Reporting Framework), requiring crypto-asset service providers to report user identities, transaction records, and balances to tax authorities, with automatic information exchange between jurisdictions.

In other words, the transparency achieved for your bank accounts today will be replicated almost entirely for your crypto asset accounts next year.

Crypto Exchanges Are Already Submitting Data Themselves

There's another prevailing narrative in the industry: investing in and holding crypto assets carries no tax risk due to "on-chain anonymity."

This premise collapses under theoretical scrutiny. Look at leading compliant exchanges; their backend systems have long integrated dedicated tax reporting interfaces. What does this mean? It means that from day one of product design, exchanges have been preparing to submit data to regulators.

The logic is straightforward. For an exchange to survive, it must obtain and maintain its license. Whether it holds a license from the US, Dubai, Singapore, or Hong Kong, compliance obligations are integral to that license, and user information exchange is arguably the most critical requirement. Exchanges will not, nor dare they risk their own survival, to help users conceal tax liabilities.

Therefore, "crypto tax exemption" has never been an inherent asset attribute; it is merely a transitional window before regulations take full effect. Treating a transitional period as an additional firewall leads to vastly different legal consequences.

The Gray Area Is Reduced to Just a Time Window

The 160 billion RMB from offshore trusts confirms one thing again: if regulators want to deeply push an initiative, there is virtually no resistance at the execution level. 90 days and 120 billion RMB collected do not require campaign-style enforcement; a single announcement plus a transition period is enough.

This judgment applies equally to crypto assets. My view is that crypto assets may retain some gray area regarding taxation over the next one to three years: after all, CARF information exchange only begins in 2027, and tracing historical transactions involves numerous technical and legal details yet to be implemented. But this is truly a question of time, not space.

Confusing "the regulator hasn't found it yet" with "the regulator cannot find it" is the most common and costly cognitive bias in this market.

My Advice

If you or your family genuinely hold offshore assets, trust structures, or large-scale crypto holdings, my advice is direct: engage in tax planning early, and do it properly.

By "properly," I mean structuring arrangements within the legal framework: how residency is determined, what structure houses the assets, where and when yields are realized, and how reporting obligations are met. Every detail requires a solid legal basis. Do not rely on stopgap measures like "not reporting," "under-reporting," or "switching wallet addresses" to gamble on regulatory patience.

The problem with temporary measures is that they are never free. The loophole you bypass today will eventually be paid back with interest in the form of late fees, fines, or even criminal liability. This offshore trust case is a ready-made example: proactive declaration during the transition period means paying only the owed tax; if discovered afterward, it results in tax plus late fees plus fines, with serious cases facing public exposure.

With tax compliance, early planning incurs a cost, while delayed planning exacts a price. The 120 billion RMB has already demonstrated that the state is serious about collecting this revenue.