HKSAR Government continues to refine regime against cross-border tax avoidance

On February 15, 2023, the Hong Kong government published a press statement to announce further upcoming changes to its tax regime following the EU’s reassessment of Hong Kong’s practices with respect to the taxation of large multi-national corporations and the further inclusion of Hong Kong on the EU’s list of jurisdictions that have committed to satisfy all the conditions of the EU’s guidance on foreign-sourced income exemption (FSIE), but have not yet managed to satisfy all provisions.
Since January 1, 2023 the new foreign-sourced income exemption (FSIE) regime for dividends, interest, equity disposal gains and intellectual property is in place in Hong Kong to only allow tax exemption from any such income for large corporations, if the „substance“ requirement – that is the requirement that the entity has a „substantial economic presence“ in Hong Kong – is satisfied. As the EU recently changed its guidance to require that the „substance“ requirement must be met for ALL capital gains, the government now announces that it will revise its FSIE regime to include this requirement.
The newly revised regime is expected to come into force on January 1, 2024 following a corresponding official consultation.