HONG KONG FOR INTERNATIONAL BUSINESS:

FIVE TAX PLANNING CASE STUDIES

In recent months, we have observed a notable increase in client requests to structure international operations through Hong Kong. The current geopolitical environment is prompting businesses and private investors to seek alternatives to traditional hubs in the Gulf region. With its territorial tax system, well-developed legal framework, extensive network of tax treaties, and strong reputation as a global financial centre, Hong Kong is emerging as one of the most compelling options.

However, the simplicity that many expect is no longer the reality in Hong Kong today. The foreign-sourced income exemption (FSIE) regime, effective from 1 January 2023 and further expanded in 2024, has significantly reshaped the taxation of passive income and gains from asset disposals. Access to tax benefits now requires meeting additional conditions – including the participation exemption, economic substance requirement, and nexus approach – as well as proper documentation and, in certain cases, advance clearance (a tax ruling) from the Inland Revenue Department.

In our latest publication, we share practical insights based on our experience working with this jurisdiction. The material includes five case studies:

• a holding company and the application of FSIE exemptions to dividends and capital gains;
• a trading company, offshore trading income, and tax residency considerations;
• individual tax residency and the exemption of passive income;
• an IP company, restructuring, and exemption of intellectual property income;
• a family investment structure using an FIHV and a family office in Hong Kong.

For each case, we outline the initial scenario, the applicable provisions of Hong Kong tax law and Inland Revenue Department practice, the solution implemented, and the outcome achieved.

This publication will be of interest to business owners and senior management of international companies, family offices, investment managers, and advisors considering Hong Kong as a platform for holding, trading, IP, and investment structures.

We would be pleased to discuss how these solutions may apply to your specific situation – please feel free to reach out to our team.