APJT 簡介

《亞太稅務期刊》 (APJT) 由香港稅務學會與香港理工大學會計及金融學院共同創辦。

該期刊發表與香港、中國和亞太地區稅務領域重大議題有關的研究論文、評論註釋、書評和文章。

APJT 旨在透過提供翔實而全面的內容，並在專業和激發思考之間取得適當平衡，為讀者提供優質的服務。

APJT 通常每年出版兩期。

In this letter, two new tax regimes are briefly discussed: the foreign source income exemption (FSIE) regime and the tax concession for family-owned investment holding vehicles.

One recent key development in the Hong Kong tax environment has been the introduction of the FSIE regime for passive income in accordance with the relevant guidance promulgated by the European Union. Under the new FSIE regime, which came into operation on 1 January 2023, certain foreign-sourced income accrued to a member of an MNE group carrying on a trade, profession, or business in Hong Kong is to be regarded as arising in or derived from Hong Kong and chargeable to profits tax when it is received in Hong Kong. The new regime provides relief against double taxation in respect of certain foreign-sourced income and transitional matters. Under the new regime, covered income means any of the following income arising in or derived from a territory outside Hong Kong: interest, dividend, disposal gain from the sale of equity interests in an entity, and intellectual property income. Covered income will continue to be exempt from tax if certain conditions are met. The specified foreign-sourced income received in Hong Kong will not be chargeable if the MNE entity meets the exception requirements specifically for the particular types of income.

The introduction of the new FSIE regime represents a significant change to Hong Kong’s territorial source taxation system, which has been a key competitive edge of Hong Kong in attracting foreign investment over many years. In the post Covid-19 era, Hong Kong is implementing various measures to revive its economy and attract foreign investment. Whether the new regime will have a negative impact on attracting foreign investment is still uncertain. If it does have a negative impact, are there any alternative financial and taxation measures which can reduce the impact? These two questions are worthy of further research by the government, academics, and tax experts. Certainly, from the taxpayers’ perspective, they should evaluate whether the new regime will create any problems to their existing structure and operations. If it does create problems, how taxpayers can address them will be a very challenging question to answer. In the Hong Kong Technical column of this issue, we are pleased to have an article offering insightful views on the new FSIE regime.

The Inland Revenue (Amendment) (Tax Concessions for Family-Owned Investment Holding Vehicles) Bill 2022 (“the Amendment Bill”) was gazetted on 9 December 2022 and introduced into the Legislative Council on 14 December 2022. The Amendment Bill aims to provide profits tax concessions for 1) eligible family-owned investment holding vehicles (FIHVs) managed by eligible single family offices (SFOs) in Hong Kong and 2) family-owned special purpose entities (FSPEs). Only the assessable profits of FIHVs and FSPEs arising from qualifying transactions and incidental transactions would be eligible for profits tax concessions, which would apply in respect of a year of assessment commencing on or after 1 April 2022, subject to the passing of the Amendment Bill by the Legislative Council.

The Amendment Bill proposes introducing a new concessionary tax regime that applies similar concessionary tax treatment granted under the unified fund exemption (UFE) regime to FIHVs. Under the proposed regime, the assessable profits of FIHVs earned from qualifying transactions and incidental transactions (subject to a 5 per cent threshold) will be taxed at a 0 per cent concessionary tax rate. In line with the tax treatment under the UFE regime, the above tax concessions will also be provided to FSPEs or interposed FSPEs (IFSPEs) owned by an FIHV in respect of that portion of the assessable profits of the FSPEs/IFSPEs that corresponds to the percentage of beneficial interest of the FIHV in the FSPEs or IFSPEs.

 

The Amendment Bill may be regarded as a measure to compensate for the loss of competitive advantage, if any, as a result of the introduction of the new FSIE regime. It may attract more family offices to set up and operate in Hong Kong and hence strengthen the competitiveness of Hong Kong as a full-service financial asset management centre. However, the proposed regime only provides tax concessions in respect of profits derived by an FIHV or an FSPE/IFSPE from transactions in specified assets, as listed in Schedule 16C to the Inland Revenue Ordinance (IRO) (qualifying assets). Some common types of investment, such as overseas immovable properties, art pieces, antiques, etc., would not qualify for the concessions. To make the proposed regime more attractive, the government may consider expanding the scope of qualifying assets. Furthermore, the proposed regime does not cover eligible SFOs. In Singapore, SFOs that qualify for the Financial Sector Incentive — Fund Management Scheme will be taxed at the concessionary tax rate of 10 per cent on qualifying income if the required conditions are met. To make our tax system match with Singapore, the government may also need to consider granting a similar tax concession to eligible SFOs. In the Hong Kong Technical column of this issue, we are pleased to have an article providing a more comprehensive discussion on the proposed Amendment Bill.

This issue of the Journal contains a variety of articles contributed by authors from Hong Kong and overseas. In the Hong Kong Technical column, there is a review of recent Board of Review cases. As mentioned above, there is an article on the new FSIE regime and another one on the proposed FIHV tax concession regime. In the PRC column, there is an article discussing the impact on the PRC tax system made by the Global Anti-Base Erosion Model Rules (Pillar 2). In the International column, there is an article on a new rule in India that may affect the Indian tax exposure of private US retirement accounts. In the Belt and Road column, there is an article discussing the 2022 Chilean tax reform. To celebrate the golden jubilee of the 50th anniversary of the establishment of The Taxation Institute of Hong Kong, in 2022, the Institute held the first Tax Policy Paper Competition. In this issue, there is a special column publishing the articles of the champion, 1st runner-up, and 2nd runner up of the competition.
We would like to express our heartfelt thanks to the authors for contributing these insightful articles. Our special thanks go to the reviewers for their valuable comments. Last but not least, we wish to thank our readers for their continued support. We hope you will enjoy reading the Journal. We welcome any comments and suggestions to improve its content and quality. If you wish to voice your views and suggestions on any tax matters, be they policy issues or practical matters, you are welcome to submit a letter to the editors.

The Joint Editors
February 2023