CHINA Trends and Developments Contributed by: Jun Zhang, Xiaochu Zhang and Wan Hu, Dacheng Law Offices
Dacheng Law Offices 16-21F, Tower B, ZT International Center No 10 Chaoyangmen Nandajie Chaoyang District Beijing China
Tel: +86 105 813 7799 Fax: +86 105 813 7788 Email: zhangjun.1@dentons.cn Web: www.dachenglaw.com
Innovations in China’s Trust Registration System and Charitable Trusts: Policy Analysis, Legal Insights and Industry Outlook Based on National Pilot Experiences Policy background and legal evolution: from institutional gaps to practical breakthroughs After years of exploration, China’s trust industry has become increasingly prominent in serving the real economy, wealth management and social govern - ance, but the long-term absence of a diversified trust property registration system remains a key bottleneck restricting the development of the industry. Since the latter half 2024, Beijing, Hangzhou, Shanghai and oth - er places have introduced special policies to develop the trust registration system from theory to practice. This marks the official entry of China’s trust industry into a new stage of transformation towards a “service trust”. Legal and policy roadblocks • Although the Trust Law of the People’s Republic of China (hereinafter referred to as the “Trust Law”) provides for the registration requirements of trust property, the lack of operational rules before the introduction of local policies has led to a prolonged period of “difficulty in complying with the law”. • There are no tax policies in place for the applica - tion of assets such as equity/stocks and real estate into trusts, and the tax burden creates an obstacle to the promotion of multi-asset trusts. • Although the Trust Law allows for the transfer of mortgaged property and leaves room for real estate trusts to “transfer with charge”, further refinement
of the policy is urgently needed to enrich the prac - tical application of the trust. Although the family trust business of equity and real estate has been carried out for many years in practice, the above problems still need to be solved urgently, so as to further promote the development of asset servicing trusts in the context of the “three classifica - tions of trusts”. Equity trust registration: restructuring and practical innovation Beijing: institutional breakthroughs and refinement of operational processes According to the “Notice on the Registration of Equity Trust Property (for Trial Implementation)” (hereinafter referred to as the “Equity Trust Registration Notice”), the registration of equity trusts realises the “explicit publicity” of the independence of the trust property for the first time. It specifies that the equity belongs to the trust property, and makes a distinction in the form of publicity between the trust property and the trustee’s (trust company’s) inherent assets. In addi - tion, the process for the registration of equity trust property is set out in detail. Challenges and paths to optimisation • Geographical limitation: limited to trust institutions and limited liability companies registered in Beijing, cross-regional promotion requires policy synergy. • Tax obstacles: equity transfers are still treated as transactions and subject to 20% personal income tax for natural person shareholders. The industry
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