Research on Dilemma and Response Strategies of Income Tax Collection in Family Trusts

Family trusts have gained popularity among high-net-worth groups due to their ability to help clients preserve and increase the value of their assets, maintain confidentiality of personal information, and provide tax avoidance and saving benefits. However, China currently lacks relatively comprehensive tax policies targeting family trusts, leading to dilemmas in income tax collection for family trusts, which hinders their development. This research aims to propose recommendations for improving the income tax system applicable to family trusts in China. The main methodological approach involves systematic textual analysis in indicating the development of family trusts, and challenges in levying income tax on family trusts in China. The main challenges in collecting income tax for family trusts in China include difficulties in clarifying the tax subjects and their criteria, defining the scope of trust property which remains limited and homogeneous, the absence of tax incentive mechanisms for family charitable trusts, and insufficient regulatory measures related to tax preferences. To address these issues, this paper proposes recommendations such as clarifying the tax subjects of family trusts, defining the scope and methods of trust property registration, incorporating family charitable trusts into the tax incentive framework, and improving the regulatory system for tax preferences related to family trusts.