Foreign-sourced
Income Exemption (FSIE)
What is Foreign-sourced Income Exemption (FSIE)?
Under Foreign-sourced Income Exemption (FSIE), certain foreign-sourced income (eg: interest income, dividend income, disposal gain from sale of equity and intellectual property income) earned by member of a multinational enterprise (MNE) can be deemed as taxable income in Hong Kong, unless those foreign-sourced income fulfill the exemption requirements (Economic Substance Requirement / Nexus Requirement / Participation Requirement).
In the past, many MNE set up Hong Kong companies to hold bonds, equity or intellectual properties and receive foreign-sourced income which were not taxable under Hong Kong Profits Tax. However, after the enactment of the Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced Income) Ordinance 2022, effective on 1 January 2023, the above income is no longer automatically tax-exempted income if the relevant exemption requirements are not satisfied.
How CK Tax helps client to handle tax risk related to FSIE?
-
Advise the tax implications of FSIE and the mitigation measures
-
Understand the tax background of the Group and the Hong Kong company
-
Review the relevant information and documents for exemption requirements
-
Based on the current situation of the Hong Kong company, assess whether the exemption requirements could be satisifed and advise the relevant tax risks
-
Assist in setting up action plans and work schedule to implement the recommendations
FSIE imposes significant tax risks to MNE entities. Hence, you are highly recommended to consult the tax professionals with extensive tax experience to review the tax risks associated with FSIE and work on the mitigation measures to minimize the tax burden.
For further information, please contact 展群CK ®:
a. Phone at (852) 3502 7392
b. Whatsapp at (852) 5227 9242
c. Email at info@ck-tax.com