CHINA Trends and Developments Contributed by: Jun Zhang, Xiaochu Zhang and Wan Hu, Dacheng Law Offices
pay attention to managing third-party verification and ensure the confidentiality of trust-related information. Market effects and existing problems • Asset activation: the promotion of real estate trust registration can revitalise more than one trillion yuan in real estate assets. Once the real estate is placed into the family trust, it will be independent of the inherent property of the principal, trustee and beneficiaries, and not affected by personal risks such as debt risk, marital risk, investment risk, inheritance risk and tax risk. Therefore, the secu - rity of the property is effectively protected and the isolation of risk is realised. Under the real estate trust system, the principal can make full use of the flexible and customised function of the trust to separate and concurrently manage the “ownership, management, use and benefit” of the real estate. Combined with the provisions of the Civil Code of the People’s Republic of China (hereinafter referred to as the “Civil Code”) on the “right of abode” and under the premise of guaranteeing the long- term residence of specific family members during their lifetime, the directional inheritance of the real estate, intergenerational inheritance, precise inher - itance and privacy inheritance, and the inheritance wishes of the principal can be ensured. • Operational constraints: non-trust institution trus - tees (eg, natural persons) are still unable to register trust property, limiting the applicable scenarios for real estate trusts and restricting the development of civil trusts. In addition, according to the regula - tions, only real estate registered under the name of the trustee is placed into the trust, and there are no practical cases involving more complex scenarios such as trustees holding real estate on behalf of the settlor or acquiring real estate through the trust structure, which are consequently subject to a cer - tain degree of uncertainty as to whether they can be registered. • Tax regime to be determined: currently, the Notice on Registration of Real Estate Trusts (Beijing) does not include the tax department as either an issuer or recipient, while the Notice on Registra - tion of Real Estate Trusts (Shanghai) includes the tax department as an issuing body but does not specify the tax policy or type. Under the current tax regime, real estate trusts will face higher tax
burdens at all stages of establishment, operation and termination. These tax burdens will increase the cost of real estate trusts and reduce their attractiveness. However, the “deed tax comple - tion (or tax exemption) certificate” mentioned in the Notice leaves room for future tax incentives or exemptions. Innovations in charitable trusts: the leap from funds to non-monetary property As an important part of the charitable system, the charitable trust system, while in the process of devel - opment, is gaining recognition for its functional value. All sectors of the society now have high expectations for the continuous development of charitable trusts in China. In December 2023, the Charitable Law of the People’s Republic of China (hereinafter referred to as the “Charitable Law”) was amended, further improving the system related to charitable trusts. The Provisions on Annual Expenses and Management Costs of Chari - table Trusts, which was issued on 18 December 2024, established for the first time the standards for annual expenses and management costs of charitable trusts, thereby filling in the gaps in the management system of charitable trusts. The revision of the Measures for the Administration of Charitable Trusts is also in pro - gress. In practice, interest in multi-asset charitable trusts has continued to increase. Policy support and practical breakthroughs In February 2025, Hangzhou real estate registration enterprise special window was made been available for “real estate charitable trust property registration” service. Hangzhou Daily reported, “This innovation allows enterprises or individuals to transfer the right to use state-owned construction land and housing ownership to charitable trusts, by simplifying the pro - cess, cancelling the net signature filing and other ini - tiatives, to significantly reduce the processing time for real estate donations, which breaks through ‘the last mile’ challenge to register and apply for certificates from the real estate charitable trusts.” • Hangzhou example: the first case of real estate charitable trust in China was established in Tonglu, with Wanxiang Trust and Charity General Asso - ciation as co-trustees, and the proceeds of the
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