- FSTB
- Secretary's Blog
- Turning Hong Kong into a cornucopia of enterprises through facilitation of company re-domiciliation to Hong Kong
Secretary's Blog
Today, the Financial
Services and the Treasury Bureau (FSTB) published the public consultation
conclusion and latest legislative proposals for the company re-domiciliation
regime (This link will open in a new windowhttps://www.fstb.gov.hk/fsb/en/publication/consult/doc/ConsultationConclusionOnCompanyRe-domiciliationRegime_e.pdf). I would
like to take this opportunity to share the thinking behind the proposals as
well as the highlights therein.
A focused policy to draw in enterprises
It is a key policy objective of the current-term Government to enhance competitiveness through attracting enterprises and investment. The FSTB will put in place an inward re-domiciliation regime to turn the Hong Kong market into a cornucopia of enterprises that draws in foreign companies. These companies may bring demand for professional services, investment and job opportunities, which will transform into a new driving force for development of the local markets.
The policy intent of the
proposed company re-domiciliation regime is to provide a simple and straightforward
route for non-Hong Kong companies to transfer their domicile on the premise
that the integrity of Hong Kong’s business environment will be safeguarded. Last year, we carried out a public consultation and consulted the Legislative
Council (LegCo) Panel on Financial Affairs. We are glad to note that the proposal is
unanimously supported by the general public and the market.
Enhanced
procedures for business facilitation
Our latest legislative
proposals cover four types of companies that can be formed under the Companies
Ordinance (CO), namely private companies limited by shares;
public companies limited by shares; private unlimited companies with a share
capital; and public unlimited companies with a share capital, with a view to focusing
on attracting company types with high value-adding potential and economic benefits. Moreover, we have actively responded to the valuable
views collected during the consultation, incorporating them to enhance the
below re-domiciliation eligibility criteria and procedures to facilitate
companies’ applications for re-domiciliation and business continuity:
Clear tax obligations and elimination of burden
To address base erosion and profit-shifting risks arising from the digitalisation of the economy, currently more than 140 jurisdictions indicated acceptance of the international reform proposals drawn up by the Organisation for Economic Co-operation and Development (BEPS 2.0). The BEPS 2.0 proposals ensure that in-scope large multinational enterprise groups pay a global minimum tax of at least 15 per cent on income derived by their constituent entities in every jurisdiction where they operate, thus reducing the latitude for jurisdictions to introduce tax exemption or extremely low preferential tax rate as a means to enhance their tax competitiveness in future. In addition, the economic substance requirement imposed on some companies incorporated or registered in the no-tax or only nominal-tax jurisdictions in recent years increases the compliance cost borne by these offshore companies, in turn undermining the incentives for these companies to maintain their offshore registrations. The introduction of a company re-domiciliation regime in Hong Kong will enable these companies, especially those with a business focus in the Asia-Pacific region, to transfer their domicile to Hong Kong in response to the increasing compliance burden.
During the re-domiciliation
process, a company may be taxed by its original domicile for its unrealised
profits (commonly known as “exit tax”).
If, after re-domiciliation, the company’s actual similar profits are
also taxed in Hong Kong, we will provide the company with unilateral tax
credits for elimination of double taxation.
Also, we will stipulate necessary transitional tax matters in the Inland
Revenue Ordinance to provide certainty on the companies’ profits tax
obligations after re-domiciliation, thus facilitating their tax planning.
All-out efforts for early implementation
The introduction of a company re-domiciliation regime is of great significance in Hong Kong’s corporate governance policy. It interfaces with multiple policy areas, requiring a comprehensive review of the applicability of different laws and regulations of Hong Kong to re-domiciled companies, so as to enable companies re-domiciled to Hong Kong to operate in an orderly manner as well as benefit from Hong Kong’s strengths in our corporate governance regime, rule of law, taxation system and professional services. We are pressing ahead with the drafting of the legislation with a view to submitting the Bill to the LegCo as early as practicable. In the meantime, we look forward to your continued support for this exercise.
3 July 2024