Hong Kong: Treatment of foreign-sourced in-kind dividends under foreign-sourced income exemption regime
The IRD determined that the in-kind dividends will not be regarded as “received in Hong Kong” for the purposes of the FSIE regime.
The Inland Revenue Department (IRD) clarified that foreign-sourced in-kind dividends (in form of shares of an overseas group company) received by a Hong Kong company as part of an internal group restructuring are not regarded as received in Hong Kong under the foreign-sourced income exemption (FSIE) regime.
Overview
The applicant is a company incorporated in Hong Kong and a member of a multinational group. The applicant is wholly owned by its immediate parent company which is a company incorporated and carrying on business in Hong Kong.
The applicant held a wholly owned foreign subsidiary (Company S1) which in turn held another wholly owned foreign subsidiary (Company S2). As part of the internal group restructuring, Company S1 distributed all the issued shares of Company S2 at their fair value to the applicant as in-kind dividends. The shares were distributed by the applicant to its immediate parent company on the same day as in-kind dividends. Company S2 does not have any establishments, operations or assets in Hong Kong.
For more information contact a KPMG tax professional:
David Ling | davidxling@kpmg.com