Hong Kong Tax News Flash

Jan 2025, Issue 1

Migrating to Hong Kong: Hong Kong Government introduces amendment bill for company re-domiciliation regime

Following the consultation conclusion published by the Financial Services and Treasury Bureau in July 2024, the legislative bill to introduce an inward company re-domiciliation regime (Bill) was gazetted on 20 December 2024. In brief, the Bill seeks to amend the Companies Ordinance (Cap. 622) (CO) to introduce an inward company re-domiciliation regime, which will enable a non-Hong Kong company to transfer its domicile (i.e. essentially place of incorporation) to Hong Kong while maintaining its legal identity. The policy intention is to create a comparatively simple and cost-effective route for overseas companies to re-register their place of incorporation to Hong Kong instead of winding-up the existing company in the original domicile and then incorporating a new Hong Kong company (along with any business/asset transfer that might otherwise be required). Upon re-domiciliation, the re-domiciled company will be required to comply with the same relevant requirements as other locally-incorporated companies under the amended CO.

In conjunction with the proposed changes to the CO, the Bill proposes to amend, amongst various other ordinances, the Inland Revenue Ordinance (IRO), such as adding a new schedule to outline the tax treatments for re-domiciled companies that have not carried on a trade, profession or business in Hong Kong prior to re-domiciliation. These include provisions for transitional tax matters and unilateral tax credits to facilitate a tax-neutral re-domiciliation process, thereby providing re-domiciled companies with greater degree of certainty concerning their tax liabilities and obligations in Hong Kong.

It is noteworthy that the Bill has included specific provisions to address key tax issues of concern to stakeholders and provides much-needed certainty. Specifically, a re-domiciled company, with the exception of an airline, will be regarded as a company incorporated in Hong Kong for purposes of Hong Kong laws, including the IRO. Consequently, it will generally qualify as a Hong Kong tax resident under most tax treaties signed by Hong Kong and other jurisdictions. Additionally, no stamp duty liabilities will arise from the re-domiciliation process.

The Inland Revenue Department (IRD) has also published online guidance with illustrative examples to explain the tax aspects of the Bill.

This news flash summaries the salient provisions of the Bill with focus on the tax-related provisions and our observations thereon.

*Tiang & Partners is an independent Hong Kong law firm and a member of the PwC network