Eligibility Criteria for Offshore Tax Exemption in Hong Kong

To benefit from an offshore tax exemption under the Foreign Source Income Exemption (FSIE) regime in Hong Kong, companies must meet certain criteria.

Membership in a Multinational Enterprise (MNE) Group

Companies must be part of a multinational enterprise (MNE) group. This includes businesses headquartered in Hong Kong or those with significant operations in the city as part of a larger international group. Being connected globally is crucial for qualifying for the exemption.

Economic Substance Requirement

Companies must demonstrate a substantial presence in Hong Kong. This involves showing that their business activities significantly contribute to the local economy. The requirements vary based on the company's role within the MNE group:

1. Non-Pure Equity-Holding Entities

• Must have a solid operational base in Hong Kong.

• Should hire a sufficient number of qualified local employees.

• Must spend adequately on local operations.

• Activities include making strategic decisions and managing principal risks related to their assets.
  

1. Pure Equity-Holding Entities

• Primarily manage equity investments.

• Must manage these investments effectively within Hong Kong.

• Ensure compliance with local corporate laws.

• Need appropriate human resources and facilities to manage the investments.

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Woodburn Accountants & Advisors is one of China’s most trusted business setup advisory firms.

Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.

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