Hong Kong: Public consultation on proposed company re-domiciliation regime

Application process and proposed changes to tax laws

Application process and proposed changes to tax laws

The government launched a public consultation on a proposed regime for non-Hong Kong incorporated companies to re-domicile to Hong Kong.  

Under the proposed regime, a company incorporated outside Hong Kong could apply to change its place of incorporation to Hong Kong while maintaining its legal identity as a corporate body, subject to certain conditions.    

Proposed company re-domiciliation regime

  • The proposed regime would cover all five types of companies that could be formed in Hong Kong under the Companies Ordinance, or their comparable types in the company’s original place of incorporation.  
  • Upon completion of the re-domiciliation, the re-domiciled company would retain its legal identity (i.e., no new legal entity is created), and the company’s property, rights, obligations and liabilities would not be affected.
  • The re-domiciled company would have the same rights and obligations as any other companies of its kind incorporated in Hong Kong.
  • No economic substance test for foreign companies to be eligible for the re-domiciliation mechanism is proposed.

Application process under the proposed regime

  • The proposed regime (including processing and approval of applications) would be administered by the Registrar of Companies.  
  • To determine whether companies re-domiciling to Hong Kong are of good standing, the following factors would be considered:
    • Compliance with the legal requirements on transfer of incorporation in the original place of incorporation
    • Integrity
    • Member and creditor protection
    • Solvency 
  • Upon successful application, the company would be registered in the Companies Register and issued a certificate of re-domiciliation. The re-domiciled company would then be required to notify the Registrar of Companies and provide evidence of de-registration in its original place of incorporation within 60 days in order to complete the re-domiciliation process.  

Proposed related changes to tax laws

The profits tax exposure of a company in Hong Kong is determined by whether it carries on any trade or business in Hong Kong and derives any Hong Kong-sourced profits from such trade or business. As such, the place of incorporation of a company or re-domiciling to Hong Kong would not generally affect the company’s Hong Kong profits tax exposure. A potential exception to the above is when the profits tax liabilities of a company is dependent on its Hong Kong-tax-resident status and the re-domiciliation would result in the re-domiciled company becoming a Hong Kong tax resident. The consultation paper states that the government will introduce consequential amendments to the tax law to provide certainty to the re-domiciled companies on their tax obligations and deal with certain transitional tax matters, such as tax deduction for trading stock, bad debts, impairment losses on financial assets, and depreciation of fixed assets.

For more information, contact a KPMG tax professional:

David Ling | davidxling@kpmg.com



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