Hong Kong passes law allowing company re-domiciliation

The inward re-domiciliation regime in Hong Kong was enacted on 23 May 2025, allowing non-Hong Kong companies to re-domicile while keeping their legal identity and business continuity.

The Hong Kong company inward re-domiciliation regime became law on 23 May 2025.

Effective immediately, non-Hong Kong incorporated companies that have successfully registered as re-domiciled companies under the Companies Ordinance (Cap. 622) (CO) can preserve their legal identity and maintain their business continuity under this regime. Several committee-stage amendments were introduced to enhance clarity, addressing key areas such as members’ consent requirements, legal opinion guidelines, and solvency assessments.

Hong Kong does not impose tax based on residence or domicile. Under the IRO, any persons, including corporations, partnerships, trustees and bodies of persons, carrying on any trade, profession or business in Hong Kong are chargeable to tax on all profits (excluding profits arising from the sale of capital assets) arising in or derived from Hong Kong from such trade, profession or business.

If a non-Hong Kong incorporated company has carried on a trade, profession or business in Hong Kong before it re-domiciles to Hong Kong and has profits chargeable to tax from such trade, profession or business before its re-domiciliation, it will have profits tax liabilities from such profits.

Re-domiciliation will not relieve the company from its profits tax liabilities in respect of the pre-domiciliation period.

If, however, a non-Hong Kong incorporated company has never carried on any trade, profession or business in Hong Kong before it re-domiciles to Hong Kong, no profits tax will be charged on the company for the period before it commences business in Hong Kong.

The legislative amendments to the IRO are not applicable to the situation where a re-domiciled company has carried on the same trade, profession or business in Hong Kong before and after re-domiciliation. They only apply to the situation where a re-domiciled company has carried on a trade, profession or business outside Hong Kong before re-domiciliation and commences to carry on the same or another trade, profession or business in Hong Kong after re-domiciliation. The main aspects covered by the legislative amendments to the IRO are as follows─

1. Adding general interpretation provisions under section 2 of the IRO to the effect that references therein to a company “incorporated in Hong Kong” include a re-domiciled company and references to a company “incorporated outside Hong Kong” exclude a re-domiciled company.

Generally speaking, under the comprehensive avoidance of double taxation agreements or arrangements (CDTA) signed between the Hong Kong Special Administrative Region (HKSAR) and other jurisdictions, a resident of the HKSAR is defined for the purpose of the CDTA to mean, among others, a company incorporated in the HKSAR or, if the company is incorporated outside the HKSAR, being normally managed or controlled in the HKSAR. By adding the above general interpretation provisions to the IRO, when construing the term “resident of the HKSAR” under the CDTA, a re-domiciled company will also be regarded as a company incorporated in Hong Kong and, in turn, a resident of the HKSAR.

2. Introducing new Schedule 17L to the IRO to address matters regarding transitional tax arrangements and elimination of double taxation:

Transitional tax arrangements

General conditions for the deduction of expenses or expenditures

Any expense or expenditure incurred in the production of the assessable profits of a re-domiciled company is to be allowed for deduction to the extent that no deduction─
- is allowable in respect of the expense or expenditure for the purposes of profits tax under other provisions of the IRO; and
- has been allowed in respect of the expense or expenditure for a similar tax imposed under the law of a place outside Hong Kong.
Without limiting the deduction criteria imposed by other provisions under Division 4 of Part 4 of the IRO, the general conditions apply to all expenses or expenditures incurred by re-domiciled companies before re-domiciliation which are deductible for the purposes of profits tax.

Elimination of double taxation

If a re-domiciled company has paid tax in its place of incorporation which is of substantially the same nature as profits tax (specified tax) in respect of its unrealized income or profit (specified income) because of company re-domiciliation, and after re-domiciliation, profits tax under Part 4 of the IRO is also payable on the actual income or profit derived by the re-domiciled company, unilateral tax credits are available to the company for elimination of double taxation in the re-domiciliation year or any subsequent year of assessment.
The amount of the actual income or profit for a particular year of assessment must not exceed the specified income (relevant income). In addition, the amount of the tax credit for a particular year of assessment is capped at the lower of the specified tax paid or the profits tax payable on the relevant income.
Any excess amount of the specified tax paid over the cap of the tax credit will be allowed for deduction in ascertaining the assessable profits of the re-domiciled company for the particular year of assessment.