CHINA Law and Practice Contributed by: Yingzi Liu, Tsaopei Wei, Han Zhou, Peng Lan and Kexin Yan, Hylands Law Firm
10.4 Artworks Exempt from Inheritance/ Donation Taxes As of 2026, China has not established a specific inher - itance or gift tax. 10.5 Trusts Artworks can be established as trust property. Accord - ing to the Trust Law of the People’s Republic of China, a trust refers to an act whereby the settlor, based on trust in the trustee, entrusts the property rights to the trustee, who manages or disposes of them in the trus - tee’s own name, according to the settlor’s wishes, for the benefit of the beneficiary or for a specific purpose. The subject of a trust is property rights, and artworks that possess value attributes and are legally consid - ered valuable movable property can legally become trust property. According to the Trust Law, the purpose of the trust is one of the necessary conditions for establishing a trust, but the purpose must not violate laws or admin - istrative regulations, nor harm public interests. In the context of artwork inheritance, the trust structure with artworks as trust property is a good inheritance tool for realising the cultural and economic value inherit - ance of artworks. Currently, beneficial attempts have already begun in China, and as long as they do not violate legal provisions, issues of penalties are not yet involved.
the risk of collection fragmentation due to scattered heirs and achieving bankruptcy isolation between art assets and family members’ personal risks. 10.2 Legal and Fiscal Issues in Artwork Succession The most prominent conflict in intestate or testamen - tary succession is between indivisibility and fractional inheritance. If a high-value artwork is jointly inherited by multiple heirs, it easily leads to a deadlock in the exercise of joint rights. Fiscally, although discussions on inheritance tax remain in the deliberation stage, the personal income tax and value-added tax involved in art transactions remain a significant burden; if heirs resell the work, the determination of the cost basis directly affects the tax load. Additionally, if the work belongs to a category prohibited from trading by the Law on the Protection of Cultural Relics, its inherit - ance is legal, but subsequent circulation is restricted, which must be fully considered when assessing asset value. 10.3 Tax Implications of Artwork Gifts and Donations For private gifts, tax law follows the principle of “rela - tive exemption, non-relative taxation”. Gratuitous gifts of artworks between close relatives are considered a legal transfer of family property and are not subject to personal income tax. However, for gifts between non-relatives, the artwork obtained by the recipient is defined as “incidental income” and is subject to personal income tax. In terms of public welfare dona - tions, the tax impact is primarily reflected in incentives for the donor; donors who give artworks to qualified public welfare organisations can deduct the amount (within limits) when calculating taxable income based on the donation receipt.
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