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Hong Kong has not yet been removed from the European Union (EU)’s latest tax watchlist issued earlier this month despite its enactment of the refined foreign-sourced income exemption (FSIE) regime last December. This is because the EU updated its guidance last December which imposes additional requirements that the scope of disposal gains covered by a FSIE regime should not be confined to those on equity interests in another entity. As such, Hong Kong needs to further enhance its refined FSIE regime as regards disposal gains by the end of 2023. The HKSAR government (the government) will soon further consult stakeholders and then vigorously engage in discussion with the EU on the exact scope of the refinement.