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IRD clarifies how the various provisions under the foreign-sourced income exemption (FSIE) regime would be interpreted or enforced
In the recently published minutes of the 2023 annual meeting between the Inland Revenue Department (IRD) and the Hong Kong Institute of Certified Public Accountants, the IRD provided the following clarifications:
- How often would a taxpayer’s claims for the satisfaction of the economic substance requirement (ESR) be reviewed?
- Is board minutes sufficient for supporting ESR for FSIE claims?
- How to attribute the ESR of a shared outsourced entity to each outsourcing entity?
- How to determine the applicable rate for the “subject to tax” condition where both federal and state taxes had been paid?
- How to determine whether the specified foreign-sourced income from a mixed pool of funds is deemed received in Hong Kong?
Clients who have any questions on the issues discussed above should contact their tax executives.