Dec 14, 2022
Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced Income) Bill 2022 by the Legislative Council on December 14.
The bill fulfils the commitment made by Hong Kong to the European Union in 2021 to amending its tax law.
The Secretary for Financial Services and the Treasury, Mr Christopher Hui, said, "The new FSIE regime not only upholds the territorial source principle of taxation, but also maintains the tax competitiveness of Hong Kong. Under the regime, multinational enterprise entities which have a substantial economic presence in Hong Kong will continue to be able to claim tax exemption for specified foreign-sourced passive income, namely interest, dividends and disposal gains in relation to shares or equity interests, received in Hong Kong. Foreign-sourced intellectual property income from qualifying intellectual property received in Hong Kong will also be exempt to the extent that the nexus requirement is complied with. Individuals and local companies will not be affected."
The FSIE regime will put in place an economic substance requirement and nexus requirement to safeguard against possible exploitation of Hong Kong's tax arrangement by shell companies to achieve double non-taxation in respect of foreign-sourced passive income.
For more details, please visit the IRD's webpage on Foreign-sourced Income Exemption.