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Hong Kong: Offshore Business Sectors

Financial Holding and Investment Activities

The SAR's non-discriminatory low tax regime makes it an extremely attractive location for holding companies to base their operations. Unusually low tax rates and a range of generous tax deductible allowances are further complemented by the complete absence of certain types of taxation. The principal fiscal advantages available to holding companies are as follows:

  • Dividend Income: Dividend income received by a holding company from a resident or non-resident subsidiary is free of an assessment to profits tax. Branch profits remitted to the parent company receive the same fiscal exemption.
  • Capital Gains: Capital gains made by a holding company on the sale of shares in a resident or non-resident subsidiary are free of an assessment to capital gains tax since there is no capital gains tax (and since in the case of a non resident subsidiary the profits arose outside the jurisdiction and therefore are not taxable under the "territorial principle"). Nor unlike other jurisdictions are capital gains deemed trading income and assessed to a profits tax.
  • Dividends Distributed: Dividends distributed to shareholders are free of withholding taxes as there are no withholding taxes in Hong Kong.
  • The Territorial Principle & Controlled Foreign Company Legislation: Unlike other jurisdictions Hong Kong does not have controlled foreign company legislation under which the profits of a non-resident subsidiary are taxed as if they were the profits of the resident parent company. Under the territorial principle income whose source is deemed to be outside the territory is exempt from tax in Hong Kong.

 

 

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