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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