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IRD issues additional guidance on how the foreign sourced income exemption regime operates
On 5 July 2024, the Inland Revenue Department (IRD) added several new Frequently Asked Questions (FAQs) and Illustrative Examples on its website relating to the foreign sourced income exemption (FSIE) regime.
The FSIE regime has been effective for certain types of specified foreign-sourced income that accrues and is received in Hong Kong on or after 1 January 2023. Under the FSIE regime, such income will be chargeable to tax when “received in Hong Kong” if the conditions for tax exemption are not satisfied.
As regards what constitutes “received in Hong Kong”, section 15H(5) of the Inland Revenue Ordinance (IRO) provides that:
“For the purposes of this Division, without limiting the meaning of “received in Hong Kong”, a sum is to be regarded as received in Hong Kong if —
(a) the sum is remitted to, or is transmitted or brought into, Hong Kong;
(b) the sum is used to satisfy any debt incurred in respect of a trade, profession or business carried on in Hong Kong; or
(c) the sum is used to buy movable property, and the property is brought into Hong Kong.”
This alert covers major clarifications made by the IRD from these additional FAQs and Illustrative Examples.
Many of the provisions of the FSIE regime are complicated when applying to certain factual situations. Clients who have any questions on the operation of the regime can contact their tax executives.