Asia Tax Bulletin – Summer time 2022 – Tax Authorities

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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.

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