China

Tax-deferred employer plans

Enterprise annuities (qiye nianjin) are voluntary, employer-sponsored defined contribution plans with individual accounts managed by qualified financial institutions. They hold segregated assets for the benefit of individual members and are likely foreign trusts under Treas. Reg. §301.7701-7.

Rev. Proc. 2020-17 may apply to enterprise annuities if the plan is a tax-favored, government-regulated retirement trust that is broadly available and nondiscriminatory. Enterprise annuity funds at larger state-owned enterprises and multinationals are the ones most likely to operate as nondiscriminatory employer plans satisfying all Section 5.03 conditions. Smaller employer plans with few members may not satisfy all conditions. The exemption is available only to an ‘eligible individual’ under §5.02: someone who is compliant (or comes into compliance) with U.S. income-tax filing and has reported the plan’s contributions, earnings, and distributions as income to the extent U.S. law requires; a participant who never reported plan earnings cannot rely on it until they do.

China's basic pension insurance (yanglao baoxian) has a social pooling component (pay-as-you-go) and a nominal individual account component. The social pooling portion is not a trust: it is government-administered social insurance. The individual account portion is more ambiguous; in practice many local governments have drawn down individual accounts to fund current retirees (the "empty accounts" problem). The prevailing view is that the basic pension is social insurance, not a foreign trust, but the analysis is less clear-cut than for Western systems.

For a plan an employer contributes to, a trust holding it is generally a nonexempt employees’ trust described in §402(b). §6048(a)(3)(B)(ii) excepts transfers to §402(b), §404(a)(4), and §404A trusts from Part I, the participant’s own contributions included, and §679 does not make the participant the owner (see the Reporting Guide’s employer-plan section). Payouts the participant reports as compensation income are excepted from Part III. If the participant’s own contributions ever exceed the employer’s, the participant is treated as the owner of the part those contributions fund (Treas. Reg. §1.402(b)-1(b)(6)), reports it on Part II and Form 3520-A each year it is owned, and is taxed on its income each year. In that count, what the participant chose to put in, salary sacrifice included, is the participant’s, and anything the plan’s rules required taken from pay is the employer’s, as the IRS chief counsel read a national retirement fund in 1997. The rest is taxed when it vests and, after that, when paid out (§402(b)(1), (2)).

Tax-deferred individual plans

The Housing Provident Fund (HPF / zhufang gongjijin) is a mandatory savings scheme where employers and employees each contribute 5%–12% of salary. Funds are held in individual accounts and can be used for home purchases, renovations, or rent, with the balance paid out at retirement.

Under Treas. Reg. §301.7701-7, the HPF has a stronger trust argument than the basic pension: it holds segregated assets in individual accounts, the funds belong to the employee, and the balance earns interest. If classified as a foreign trust, Form 3520-A and Form 3520 must be filed.

The HPF is a mandatory employer-and-employee savings scheme, but it operates primarily as a housing savings vehicle (funds are routinely used for home purchases, renovations, and rent) rather than a retirement trust. Whether it qualifies as a plan operated 'exclusively or almost exclusively' to provide pension benefits is doubtful given this housing-first purpose. Even if it clears that threshold, whether it meets all §5.03 conditions requires further analysis.

The U.S.–China treaty (Article 17(1)) makes pensions taxable only in the recipient's State of residence, but the 1984 Protocol lets the United States tax its citizens without exception, so a U.S. citizen gets no treaty relief on Chinese pension payments; the treaty has no accrual-deferral rule and does not affect 3520/3520-A reporting.

Gifts and inheritances

China is one of the most common source countries for large gifts and inheritances received by U.S. persons, given the size of the Chinese-American community and the scale of wealth transfer from China.

If a U.S. person receives more than $100,000 in gifts or bequests in a year from one nonresident alien individual or foreign estate (adding together gifts from donors related to each other), Form 3520 Part IV reporting is required. Gifts from foreign corporations or foreign partnerships exceeding $20,573 (for 2026, indexed for inflation) are also reportable. Common scenarios include:

- Cash gifts from parents in China (often for a home purchase, education, or immigration-related expenses) - Inheritance of Chinese real property, bank deposits, or business interests - Gifts from relatives who are related to each other (for example, parents and grandparents) that together exceed the threshold

China does not currently impose a gift tax or inheritance tax (though legislation has been discussed for years). The U.S. obligation is purely informational.

Documentation is important: the IRS may request evidence of the gift's source, the donor's identity and tax residency, and the fair market value of non-cash gifts. Convert Chinese yuan (RMB) at the rate prevailing when each amount is received, paid, or accrued; the IRS has no official exchange rate and generally accepts any posted rate used consistently, so its published yearly average rate is a common choice for amounts arising evenly across the year.

Penalties and practical notes

Failure to file Forms 3520/3520-A carries penalties under §6677: the greater of $10,000 or 35% of the gross reportable amount for certain Form 3520 failures (§6677(a)); 5% or $10,000 for Part II and 3520-A (§6677(b)).

The Chinese tax year is the calendar year, aligning with the U.S. No fiscal year conversion is needed.

HPF and social insurance statements can be obtained through local government portals or the employer. Documents are in Chinese and will need translation for 3520-A preparation.

China's foreign exchange controls limit the amount of currency that can be transferred out of the country ($50,000 per person per year for individuals). These restrictions do not affect the U.S. reporting obligation: the obligation to file is based on the existence of the trust interest, not on whether the funds are accessible or transferable.