Hong Kong Tax News Flash

Sep 2022, Issue 11

Proposed refinements to foreign source income exemption regime: Hong Kong as an effective investment holding platform

The consultation launched by the Hong Kong SAR government (the Government) on its proposal to refine Hong Kong’s foreign source income exemption (FSIE) regime for passive income ended in mid-July. Despite that, the Government continued to actively engage in discussions with the community to convey messages, address questions and seek feedback.

Initially, different businesses, including both Hong Kong-headquartered and non-Hong Kong headquartered multinational enterprise (MNE) groups, expressed concerns about the proposed changes. As more questions are clarified over the past few months, it becomes apparent that many of these concerns can be appropriately addressed. In particular, it appears that Hong Kong’s advantage as an effective place for setting up investment holding companies should not be significantly undermined by the proposed refinement.

This News Flash discusses the practical impact of the proposed changes, and what the Government should consider in order to effectively implement and administer the refined regime, and maintain the competitiveness of Hong Kong’s business environment.