The times are changing. Due to pressure from the European Union, Hong Kong has issued the framework of how it proposes to change its long-cherished offshore taxation rules applicable to passive investment income. Hong Kong proposes to tax offshore investment income unless the Hong Kong company receiving the income meets certain economic substance rules or if the income is not received in Hong Kong. At the same time, Hong Kong will introduce a participation exemption rule for foreign dividends and gains earned by Hong Kong companies, based on which these foreign dividends and gains would not be taxable in Hong Kong if they meet the pertinent conditions. You will read more about that in this edition of the Asia Tax Bulletin.
Further, China and Hong Kong have ratified the Multilateral Treaty and therefore certain of their tax treaties will now be subject to the anti-avoidance test contained in the Multilateral Treaty. This may have consequences for investments in Japan held by Hong Kong holding companies, which henceforth may be challenged if one of the main purposes of the structure is to benefit from the tax treaty.
Hong Kong proposes to introduce tax exemptions for qualifying family offices and at the same time Singapore is tightening the tax exemption conditions for family offices if they are not managed by a CMS-licensed fund manager. Finally, a point worth mentioning is that Malaysia has introduced tax exemptions for qualifying venture capital companies, which adds Malaysia to the short list of jurisdictions besides Singapore and Hong Kong who promote their jurisdiction for venture capital activities in Asia.
These and other news items are discussed in this edition of the Bulletin.