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Emma Ma

China’s ultra-rich are finding themselves under greater scrutiny as new tax rules on offshore trusts raise questions over their fortunes, with New York-based property tycoon Pan Shiyi’s Cayman structure cast back into the spotlight.
Market watchers said the rules – which impose a flat 20 per cent levy across a trust’s life cycle – were in line with international practices but marked a sharp escalation in the scrutiny of capital flight, with Pan’s case emerging as a touchstone.
“Prior legislation only mandated taxation for individuals holding offshore trusts, yet lacked detailed implementing rules. This new update fills the void,” said Sarah Wang, a Shanghai-based tax lawyer.
“Tax liability kicks in the moment capital is transferred into an offshore trust, covering stocks, bonds, real estate and other assets.”
Pan is one of China’s most closely followed entrepreneurs. He built his fortune from scratch and became synonymous with landmark buildings in tier-one mainland Chinese cities. He also gained notoriety for sidestepping the property crisis that engulfed rival developers from 2021.
Soho China, the property developer Pan founded with wife Zhang Xin in 1995, offloaded billions of yuan in assets in Beijing and Shanghai between 2014 and 2019, well ahead of other tycoons such as Hui Ka-yan, the former boss of collapsed developer Evergrande. However, Pan’s 2021 pursuit of a take-private deal with Blackstone fell apart, and he has since lived in the United States.
According to Soho China’s prospectus and filings, Pan transferred his equity stake in the firm as a gift to Zhang in 2005, who later moved the shares and her own holdings into Capevale, a company incorporated in the Cayman Islands.
The shares were subsequently injected into a Cayman family trust, “The Little Brothers Settlement”, two years before Soho China’s 2007 initial public offering in Hong Kong.
Domestic entrepreneurs accumulate wealth with the backing of national resources … If they move their wealth offshore to avoid tax obligations, it will trigger severe loss of domestic capital
He Yingxin, State Administration of Foreign Exchange
On listing day, the trust held more than 66 per cent of the company, worth HK$30 billion (US$3.8 billion), based on the IPO closing price. Following the greenshoe option exercise one week later, the stake diluted to around 63 per cent.
SOHO China did not immediately respond to a request for comment.
Regulations issued by the Ministry of Finance on July 24 extend taxation to every stage of a trust’s life cycle – from the initial transfer of assets into the structure, through annual returns generated by appreciation, to the eventual winding-up. The framework sets a uniform 20 per cent rate across all scenarios.
The new rules mean liabilities linked to the trust could date back to 2005, when the equity stake in Soho China was injected into the structure, with annual taxes on asset gains and fresh capital contributions even if the funds remained undistributed.
Bolstered by proceeds from asset sales and rental income, Soho China rolled out an aggressive dividend payout programme over the years. According to the company’s annual financial statements, more than HK$10 billion (US$1.28 billion) in dividends flowed to the trust.
Considerable attention has also been given to Zhang’s nationality. She serves as both settlor and one of the beneficiaries of “The Little Brothers Settlement”.
She said in a 2013 post on Chinese social media platform Weibo that she held foreign nationality. But foreign citizenship offers no exemption from tax liabilities under the new rules.
The regulations specify that individuals with overseas passports remain liable if their income is primarily sourced from mainland China.
He Yingxin, an official at the Sichuan branch of the State Administration of Foreign Exchange, laid out the rationale behind the stringent regulatory framework in a 2023 article published in International Finance magazine.
“Domestic entrepreneurs accumulate wealth with the backing of national resources – including banking loans, preferential policies from local authorities and domestic market demand,” He said. “If they ‘cash out’ on the mainland and then move their wealth offshore to avoid tax obligations, it will trigger severe losses of domestic capital.”
According to He, the Soho-style model of overseas IPOs paired with offshore trusts started to gain traction in 2018. He estimated that there were 54 such cases between that year and 2023, including Beijing-based tech giant Xiaomi, Shanghai-based bargain e-commerce site Pinduoduo, and the popular Chinese hotpot restaurant chain Haidilao.

Taxation enforcement targeting offshore trusts relies on the Common Reporting Standard (CRS), a global framework established by the Organisation for Economic Co-operation and Development designed to curb tax evasion.
Under the regime, banks and financial institutions must gather client account information and exchange the data with tax authorities in participating jurisdictions.
China committed to adopting the CRS in 2014 and began its first round of CRS information exchanges in September 2018.
“Delivering more precise and detailed tax-related data, the CRS is now formally leveraged [by China’s tax authorities] to pursue offshore tax recoveries and conduct anti-tax avoidance investigations,” Niu Lupeng, a visiting professor at Tsinghua University, wrote in an article published on Tuesday by China Taxation News.
The publication operates under the supervision of the State Taxation Administration.
Dai Shiyou, director of the State Taxation Administration’s tax policy and legislation department, said in April that authorities would “continuously strengthen tax supervision” by utilising data from the CRS to analyse declared international incomes.
The finance ministry has given individuals a 90-day window from July 24 to declare offshore trusts and settle liabilities without incurring late-payment penalties.
“Offshore trusts typically hold large asset pools and generate substantial returns,” Niu noted. “Affected taxpayers should file declarations and settle outstanding tax liabilities within the grace period.
“Failure to comply will not only trigger substantial late-payment surcharges, but the conduct may also be deemed tax evasion, attracting statutory fines in accordance with the law.”


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Soho China founder Pan Shiyi’s Cayman trust faces scrutiny as Beijing’s tax overhaul puts offshore wealth strategies in focus


Soho China founder Pan Shiyi’s Cayman trust faces scrutiny as Beijing’s tax overhaul puts offshore wealth strategies in focus.


Could China’s new trust tax pull Pan Shiyi’s wealth into the capital flight spotlight?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Soho China founder Pan Shiyi’s Cayman trust faces scrutiny as Beijing’s tax overhaul puts offshore wealth strategies in focus

Soho China founder Pan Shiyi’s Cayman trust faces scrutiny as Beijing’s tax overhaul puts offshore wealth strategies in focus