Hong Kong’s Amendment to Re-Domiciliation Regime

In early January 2025, Hong Kong proposed to introduce an inward company re-domiciliation regime.

Under the Companies (Amendment) (No. 2) Bill 2024 (the Amendment Bill), which was gazetted on 20 December 2024, non-Hong Kong incorporated companies are able to preserve their legal identity and maintain their business continuity, upon successful registration as re-domiciled companies under the Companies Ordinance.

The proposed change would allow non-Hong Kong companies incorporated or domiciled in any foreign country, to now move their domicile to Hong Kong from the jurisdiction of incorporation.

Any non-Hong Kong incorporated companies that have successfully registered as a re-domiciled company in Hong Kong, will still be able to maintain the business continuity under the same legal identity while enjoying the benefits of a locally incorporated company.

Tax Implications of Re-domiciliation in Hong Kong

Hong Kong adopts a territorial basis of taxation. Profits tax is payable by any person including corporations, partnerships, trustees and bodies of persons, carrying on any trade, profession or business in Hong Kong are chargeable to tax on all profits arising in or derived from Hong Kong from such trade, profession or business. Hence, the tax residence of a person is irrelevant, and there is no distinction between residents and non-residents when it comes to liability to profits tax.

Re-domiciliation will not relieve the company from its profit tax in respect to its activity incurred during the pre-domiciliation period. Tax implications:

• Non-Hong Kong Companies which have re-domicile to Hong Kong would then be subject to a two-tiered profit tax of 8.25% of the first HKD 2 million and 16.5% onwards according to the territorial basis.
• If a non-Hong Kong Company has previously carried on any trade, profession or business in Hong Kong, for which profits tax was chargeable in Hong Kong, profit tax liability may still apply after its re-domiciles.
• If a non-Hong Kong Company has never carried out any trade, profession or business in Hong Kong before its re-domiciles to Hong Kong, no profit tax liability may apply after its re-domiciles.

Finally, under the new regime, a re-domiciled company will also be regarded as a company incorporated in Hong Kong and in turn a resident of the HKSAR – and therefore will enjoy a series of DTA agreement with several participating economies.

Current Status and Future Considerations

Currently, the initiative is pending scrutiny and confirmation by the Legislative Council; aspects of the amendment are still to be addressed to strengthen the decisions positive economic impact and the treatment of transitional tax arrangements which will provide general conditions to the tax deductions of certain expenditures and eliminate double tax liabilities to relocating corporations.

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