Two Chinese state media outlets warned on Monday against offshore tax evasion by calling out an incident involving a major social media platform and its Hong Kong entity, sending a message that Beijing is intensifying its scrutiny of cross-border corporate structures. The China Securities Journal, which is affiliated with Xinhua, and the Financial News, which is supervised by China’s central bank, revealed the enforcement action, highlighting a broader regulatory tightening over the way mainland firms use offshore hubs to manage money. The Hong Kong entity in question was denied “beneficial owner” status by tax authorities because it failed to meet the criteria for substantive business operations, according to the Financial News report. Consequently, the entity failed to qualify for the preferential 5 per cent tax rate under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), meaning it was subject to a 10 per cent mainland rate. “Cross-border tax planning structures based merely on ‘formal compliance’ are no longer viable; structural designs must align with genuine commercial substance,” the Financial News reported. The social media platform was said to have paid an additional 356.1 million yuan (US$52.6 million) in taxes on distributed dividends and accrued an extra 191.8 million yuan in withholding tax for undistributed dividends. Neither state media report identified the company by name. However, the value mentioned coincided with a September 2025 disclosure by Hello Group. The Nasdaq-listed Chinese social media company, which operates the Momo dating app, was required to pay 547.9 million yuan in back taxes in the second quarter of 2025. Hello Group, previously known as Momo Inc, was initially incorporated in the British Virgin Islands in November 2011 and was redomiciled in the Cayman Islands in 2014, conducting business through its subsidiaries and affiliated entities in China. The structure of a Chinese company that is incorporated overseas but conducts business on the mainland has been widely adopted over the past two decades by firms in sectors where foreign investment has been restricted. Such arrangements allow companies to bypass domestic regulations and maintain flexibility. When these companies apply to go public in Hong Kong with an offshore entity, they are commonly known as “red chips”. In an April note, Beijing Dacheng Law Offices pointed out that Hello Group’s tax clawback was unlikely to be an isolated incident. The firm said that enterprises must focus on the principle of “substance over form” and systematically restructure existing offshore vehicles to ensure that they meet the requirements for beneficial ownership and commercial rationality. Since last year, Beijing has tightened the taxation of offshore gains for mainland residents and companies. The move has come with local authorities facing large debt piles while the central government widens fiscal deficits to boost domestic demand. China’s anti-tax-evasion campaign is sweeping across the onshore A-share and Hong Kong stock markets, with at least 80 listed firms having already been ordered this year to pay back corporate income taxes and late fees to local authorities.