May 2023 / Hong Kong

18 Maggio 2023

Hong Kong Government welcomes passage of Stamp Duty (Amendment) Bill 2023

The Government welcomed the passage of the Stamp Duty (Amendment) Bill 2023 (the Bill) by the Legislative Council on May 17. The Bill gives effect to a proposal on stamp duty made in the 2023-24 Budget, which adjusts the value bands of ad valorem stamp duty (AVD) payable for sale and purchase or transfer of residential and non-residential properties (Scale 2 rates).

The Secretary for Financial Services and the Treasury, Mr Christopher Hui, said, "The proposal mainly aims at easing the burden on ordinary families of purchasing their first residential properties, particularly small and medium residential units. After the adjustment to the value bands of AVD at Scale 2 rates, the stamp duty applicable to the property transactions with amount or value of consideration between $2 million and just below $10,080,000 will be reduced, with the amount of reduction up to $67,500. The adjustment will benefit around 37 000 property buyers, and reduce the tax revenue of the Government by about $1.9 billion a year."

The adjustment has come into effect at 11am on February 22 this year in accordance with the Public Revenue Protection (Stamp Duty) Order 2023 published in the Gazette on the same day. Any instrument executed before 11am of this day remains chargeable to AVD at the original Scale 2 rates.

Source: Inland Revenue Department

26 Maggio 2023

Hong Kong Publishes Advance Tax Ruling on Economic Substance Requirement Under FSIE Regime

On 22 May 2023, the Inland Revenue Department (IRD) published an advance tax ruling (Advance Ruling Case No. 69) that illustrates the application of section 15K of the Inland Revenue Ordinance (IRO), which provides an exception to the tax treatment of specified foreign-sourced passive income under the foreign-sourced income exemption (FSIE) regime where the economic substance requirement is met.

Briefly, the FSIE regime that became effective from 1 January 2023 subjects specified foreign-sourced income to profits tax if the income is received in Hong Kong by a multinational entity (MNE) carrying on a trade, profession or business in Hong Kong unless economic substance, nexus and/or participation requirements are met. The ruling focuses on the economic substance requirement and applies for the years of assessment 2023/24 to 2027/28.


The Applicant is a private limited company incorporated in Hong Kong and an MNE entity as defined under the IRO. It holds 20% equity interests in Company F (a company incorporated in Jurisdiction F) from which it derives offshore dividend income but is not a pure equity-holding company. The principal business activities of the Applicant are sales of hospitality packages for sporting events and investment holding.


  • The Applicant carries out or arranges to carry out its specified economic activities in Hong Kong, i.e. making necessary strategic decisions in respect of assets it acquires, holds or disposes of and managing and bearing principal risks in respect of the relevant assets.
  • The Applicant has several directors and employees in Hong Kong to manage and support its business operations. It also outsources its legal and business support activities to a non-associated service provider in Hong Kong.
  • Apart from its principal business activities, the Applicant has advanced two interest-free loans to its related parties in Hong Kong and bears principal risks of the loans. The loan transactions have already occurred and have been made within the same multinational enterprise group, hence minimal activities are required by the Applicant to manage the loans. The relevant activities in relation to overseeing the loans are carried out by the Applicant's director in Hong Kong.
  • The Applicant has planned to:
    • have a predetermined number range of employees with the necessary qualifications to carry out the specified economic activities in Hong Kong each year;
    • incur a predetermined amount range of annual operating expenditures in Hong Kong for the specified economic activities; and
    • undertake adequate monitoring of the specified economic activities carried out in Hong Kong by the service provider.


The IRD has ruled that the Applicant will satisfy the economic substance requirement under section 15K of the IRO. Advance Ruling Case No. 68 was also published on 22 May 2023, with similar facts and arrangements and also ruled as satisfying the exception requirement.

9 Maggio 2023

Hong Kong hub for giant trade region

The Regional Comprehensive Economic Partnership (RCEP) is a giant trade area extending from the fringes of the Arctic (Hokkaido, Japan, main picture) to the Antarctic (New Zealand) and encompassing the giant economy of Mainland China as well as Korea and the Association of Southeast Asian Nations (ASEAN) and Australia.

Hong Kong sits plum in the middle of this geographic area and is perfectly placed to serve as a hub city so it is no surprise to learn that about 90% of Japan-affiliated companies based in Hong Kong manage or handle business in at least one RCEP market other than Japan, according to a recent survey conducted by the Hong Kong Trade Development Council (HKTDC).

More than 60% of respondents plan to expand their RCEP operations through their Hong Kong office in the next three years, with the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) (40.4%) and ASEAN (39.4%) the most popular destinations.

The respondents make use of Hong Kong’s well-developed logistics and commercial networks, as well as its world-class business services to manage and expand global business, particularly in the Asia-Pacific region.

Supply chain integration

RCEP came into effect last year, creating the world’s largest free trade bloc made up of 15 member economies. RCEP accounts for about 30% of global gross domestic product, trade and population, injecting impetus into regional economic development.

Last year, RCEP economies accounted for 71% of Hong Kong’s merchandise trade.

“Hong Kong has applied for accession to RCEP and once approved, the city will become the first new member of the bloc, enjoying a wide range of benefits, such as tariff concessions. It will also help Hong Kong further integrate into regional supply chains and strengthen trade and investment with other members in the bloc, especially Japan and Korea, which have yet to sign free trade agreements with the city,” HKTDC Director of Research Ms Irina Fan said.

Premier platform for RCEP

About 1,400 Japanese companies have set up regional headquarters or offices in Hong Kong. With the support of the Hong Kong Japanese Chamber of Commerce & Industry (HKJCCI), the HKTDC surveyed more than 100 Japanese companies via a questionnaire to better understand their business development in the first year of RCEP, advantages of the Hong Kong platform and services, and the city’s role in helping them expand into the RCEP market.

Most survey respondents operate in the import and export trade sector, followed by wholesale and retail, finance and logistics. More than 20% said their Hong Kong office served as the company’s overseas headquarters or main regional office that manage operations outside of Japan. Other functions include marketing and sales (73.5%), logistics and supply chain management (36.3%) and sourcing and procurement (25.5%).

HKTDC Economist Mr Corey To said Hong Kong plays an important role in facilitating RCEP related business (nearly 90% of respondents manage or handle RCEP business via Hong Kong) and over 60% of the respondents saw Hong Kong as “important” or “very important” in helping capture arising business opportunities in the RCEP region.

Respondents also revealed that strong regional connectivity made Hong Kong the premier platform for RCEP. Core strengths include business networks with the mainland (88.8%), freedom of capital flows and currency exchange (79.7%), efficiency as a trans-shipment and distribution hub (72%) and more.

RCEP accession benefits

The survey also found that more than half the Hong Kong-based Japanese trading companies had already enjoyed RCEP benefits, such as unified rules of origin, lower tariffs and streamlined customs procedures. Close to 80% anticipated more benefits should Hong Kong join the bloc. This reflects Hong Kong’s role as a major logistics hub in the region as well as its deep trade ties with many RCEP economies.

Mr To said among the non-trade sector, 60% expected to benefit from Hong Kong’s RCEP accession, largely because of the anticipated increase in economic activity and investment flows across the mainland, Hong Kong and Japan, and due to improved access for service sectors and enhanced intellectual property rights protection, which will create opportunities for such sectors as e-commerce.

Overall, more than half the respondents suggested Hong Kong’s accession to RCEP would improve their company’s ability to capture RCEP business opportunities. Providing marketing information about RCEP economies and encouraging co-ordination among public bodies and regulators were also seen as helpful.

Regional business base

The survey results echo the statements made in HKTDC Research’s in-depth interviews conducted with Japan-affiliated companies in Hong Kong. These case studies show Hong Kong’s competitive edges in a number of areas, which are beneficial to Japanese companies that aim to leverage Hong Kong as a base for business expansion in the region: solid financial infrastructure, well-established hub for international trade and logistics, quality professional services and a pool of diversified talents, prime location adjacent to GBA and among key economies in the Asia-Pacific.