EU concluded that Hong Kong’s offshore income exemption regime as regards passive income is harmful

To avoid getting blacklisted, the HKSAR Government has committed to amend or impose additional conditions by the end of 2022 before such passive income could be claimed as being offshore sourced in Hong Kong.

In October 2019, the European Union (EU), via its Code of Conduct Group, published a “Guidance on foreign source income exemption regimes” (the Guidance). The Guidance sets out the guidelines to assess whether a particular foreign sourced income exemption regime (FSIE regime) is harmful.

As Hong Kong operates a territorial system of taxation which does not generally impose tax on offshore profits, the EU, upon publishing the Guidance, also selected Hong Kong’s FSIE regime for review and assessment.

The EU recently completed its review and concluded that the FSIE regime of Hong Kong is harmful insofar as foreign source passive income is concerned.

Please refer to this Hong Kong Tax alert for details of the EU FSIE’s assessment and its implications on Hong Kong.

Download this Hong Kong Tax Alert(繁體中文

Download this Hong Kong Tax Alert(简体中文

Download this Tax Alert