Authorities in China have sought to stem an outflow of capital to offshore financial centres. Beijing now imposes a 20 per cent tax on offshore trust income.

A fall in the share price of Chinese restaurant group Haidilao International Holding highlights that moves by founders to sell shares, possibly encouraged by a crackdown on offshore activity, make such businesses vulnerable, media reports said.

A 14 September report by the Straits Times (of Singapore), based on a Bloomberg article, noted that Shu Ping’s sale of about $350 million worth of shares happened after Beijing tightened controls on offshore trusts in late July. 

The crackdown shut off an exit channel for wealthy families’ money. (See a recent report here.) Beijing now imposes a 20 per cent tax on offshore trust income and is bringing overseas insurance payouts into the taxable net. 

Business owners have a 90-day grace period ending on 22 October to settle taxes owed without being charged for late payment.

Events at Haidilao, the report said, draw attention to founder-controlled companies, including Li Ning, Xiaomi and Sunac China Holdings, where large stakes are held through offshore trust structures. However, the media report added that there is no indication that their founders are planning similar share sales.

In the 12 months to yesterday, shares in Haidilao, which is listed in Hong Kong, have fallen almost 26 per cent.