12 July 2023
Traditionally, many enterprises set up investment holding companies in offshore jurisdictions such as the British Virgin Islands, Cayman Islands, Seychelles, etc. for various reasons. However, with recent international development in corporate and tax governance, including economic substance rules, the global minimum tax rate of 15% under BEPS 2.0 etc., the traditional structure can no longer serve the original business goals or purposes. In addition, with the implementation of the Common Reporting Standard, these overseas companies may encounter practical problems in operation such as the increasing difficulty in opening bank accounts.
In view of this, in order to attract more investment into Hong Kong, the Government has launched a consultation on the introduction of company re-domiciliation regime that would enable a company domiciled elsewhere to change its place of incorporation to Hong Kong
Under the proposed regime:
- No economic substance test would be imposed on the applying company.
- upon successful completion of the re-domiciliation, the company concerned will retain its identity, i.e. no new legal entity is created throughout the process. The re-domiciled company would have the same rights and obligations as any other incorporated company of its kind in Hong Kong, and should comply with the relevant CO requirements just like any other companies.
- the re-domiciliation process would not affect the property, rights, obligations and liabilities, as well as the relevant contractual and legal processes of the companies. Likewise, the re-domiciliation process also should not affect the companies’ tax obligation to the originating jurisdiction.
- Registrar of Companies would administer and approve the applications by considering various factors, such as company type, fulfilment of compliance requirements in the original place of incorporation, integrity, member and creditor protection, solvency etc.
- The re-domiciled company would be required to de-register in its original place of incorporation within 60 days upon successful application.
For more information, please contact Ms. Amie Cheung at amie.cheung@lccpa.com.hk