Hong Kong tax newsletters

Mazars’ comments on Hong Kong tax issues.

October 2023 - Bill for Tax Certainty for Onshore Disposal Gain of Equity Interests

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The Financial Services and the Treasury Bureau (“FSTB”) launched a consultation exercise on legislative proposal to introduce a tax certainty enhancement scheme for onshore equity disposal gains (“the Scheme”) in March this year. After taking into account of the stakeholders’ recommendations, the government has gazetted the Inland Revenue (Amendment) (Disposal Gain by Holder of Qualifying Equity Interests) Bill 2023 (“the Bill”) on 20 October 2023.

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October 2023 - Stamp Duty Changes in the Policy Address 2023

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Chief Executive Mr John Lee presented his Policy Address 2023 to the Legislative Council on 25 October 2023. Mr Lee considered a vibrant stock market is vital for upholding Hong Kong’s status as an international financial centre and maintaining our competitiveness.

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October 2023 - The Inland Revenue Bill for expanding the FSIE regime to cover asset disposal gains is published

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In December 2022, EU updated its Foreign-sourced Income Exemption (“FSIE”) Guidance which requires that disposal gains to be subject to the economic substance requirement (“ESR”). Hong Kong is requested by the EU to further amend its tax treatments for foreign sourced disposal gains in compliance with the updated FSIE Guidance by the end of 2023 for implementation with effect from January 2024.

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Hong Kong Budget 2022-23

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Having regard to the emergence of COVID-19’s variants and the uncertainties over the global economic outlook, the Financial Secretary, Mr Chan Mo-Po (“Mr Chan”) continued to adopt an expansionary fiscal policy in preparing the 2022-23 Budget with the objective of relieving the hardship of people and small and medium-sized enterprises and paving the way for the post-pandemic economic recovery.

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November 2022 - Bill on the proposed refined foreign source income exemption regime (“FSIE Regime”)

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In July 2022, we issued a Hong Kong tax newsletter summarizing the proposal put forward by the Financial Services and the Treasury Bureau to refine the FSIE Regime in Hong Kong. Under the proposed FSIE Regime, in-scope offshore passive income received by covered taxpayers in Hong Kong will be deemed taxable unless exception applies.

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July 2022 - Proposed changes to the offshore regime for passive income in Hong Kong

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To address harmful tax competition, the European Union (“EU”) has been requiring its Member States to refrain from introducing any new harmful tax measures and amend any laws or practices that are deemed to be harmful. With regard to non-EU jurisdictions, the EU has also been evaluating their tax regimes against international tax standards and put in place a list of non-cooperative jurisdictions for tax purposes (“EU List”). In October 2021, the EU placed Hong Kong on the watchlist of the EU List in view of the possible risks of double non-taxation arising from the tax exemption for offshore passive income in the absence of any requirement for recipient companies to have a substantial economic presence in Hong Kong. The EU’s main concern is the possible exploitation of the tax arrangement by shell companies for tax benefits.

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March 2022 – The EU grey list – What does it mean for Hong Kong businesses

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On 5 October 2021, following a review of the foreign source income exemption regimes of a few jurisdictions, the Council of the European Union (“EU”) added a few of these jurisdictions, including Hong Kong, to Annex II to the list of the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes, the so-called “grey list”.

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August 2021 - Statement on a two-pillar solution to address the tax challenges arising from the digitalization of the economy

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The G20/OECD Inclusive Framework on BEPS (“IF”) has, on 1 July 2021, approved the “Statement on a Two-Pillar Solution to Address the Tax Challenges Arising From the Digitalization of the Economy” (the “Statement” or so called “BEPS 2.0”). The Statement is approved by 133 countries and jurisdictions of the 139 countries and jurisdictions comprising the IF, including Hong Kong and China, as of 12 August 2021.

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August 2021 - Tax treatments for corporate amalgamation under the court-free procedures

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The new Companies Ordinance (“CO”) (Cap. 622) came into effect on March 3, 2014 & introduced court-free procedures for corporate amalgamations in Hong Kong.
The Inland Revenue Department (“IRD”), before the enactment of the recent tax legislation, had handled amalgamation cases based on the interim assessing practice published on its website. To provide taxpayers with clarity and certainty, the IRD introduced the Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 which codifies the IRD’s assessing practice relating to amalgamation into the Inland Revenue Ordinance (“IRO”). This bill was enacted on 11 June, 2021.

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July 2021 - Changes are around the corner: The BEPS 2.0 Pillar 2 update

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In November 2019, the OECD released the Global Anti-base Erosion (GloBE) proposal, the so-called Pillar 2 of the BEPS 2.0 project. On 12 October 2020, the G20/OECD Inclusive Framework on BEPS (“IF”) released two detailed “blueprints” in relation to its ongoing work to address the tax challenges arising from the digitalization of the economy (“Pillar 1”) and in relation to the tax rules designed to ensure that large multinational businesses pay a minimum level of tax on profits in all jurisdictions (“Pillar 2”). On 1 July 2021, 130 countries and jurisdictions, constituting vast majority of IF approved the “Statement on a Two-Pillar Solution to Address the Tax Challenges Arising From the Digitalization of the Economy” (the “Statement”). They agreed on a taxing right for market jurisdictions on at least 20% of the profits exceeding a 10% margin of large multinational enterprises (“MNE”) under Pillar 1 and a global minimum tax of at least 15% under Pillar 2.

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