Scope of the proposed re-domiciliation regime
The proposed re-domiciliation regime, which allows for inward re-domiciliation only, provides a mechanism for non-Hong Kong incorporated companies to re-domicile to Hong Kong. It applies to the following types of companies currently specified in the Companies Ordinance (CO) (or their comparable types in the original domicile):
- Private companies limited by shares
- Public companies limited by shares
- Private unlimited companies with a share capital
- Public unlimited companies with a share capital
Companies limited by guarantee without a share capital and other types of companies not specified in the CO are excluded.
Eligibility requirements
The proposed re-domiciliation regime in Hong Kong is more flexible than comparative jurisdictions such as Singapore as it: (1) does not impose an economic substance test for foreign companies to be eligible for the proposed regime (e.g., in terms of the total value of assets, amount of revenue or number of employees); and (2) is not limited to companies limited by shares.
An applicant must comply with the following requirements to re-domicile to Hong Kong:
| |
Key requirements |
Key supporting documents / information |
| 1. |
Compliance with laws of its jurisdiction of incorporation
- The law of the applicant's original place of incorporation must allow for outward re-domiciliation to other jurisdictions and the applicant must comply with the applicable legal requirements.
- The company type under the law of the original domicile must be the same or substantially the same as that of the intended company type under the CO.
|
- Legal opinion of a legal practitioner who practises the law of the place of incorporation of the applicant ("Legal Opinion") on (i) and (ii)
- Confirmation in the re-domiciliation form on (i) and (ii)
- Director's certificate
|
| 2. |
Minimum period of incorporation
The applicant must have been incorporated for at least one financial year as at the date of application.
|
- Certified copy of the certificate of incorporation
- Legal Opinion
- Director's certificate
|
| 3. |
Integrity
There must be no intention to use the re-domiciled company for unlawful purposes, or for engaging in activities that are against the public interest or would endanger national security in Hong Kong.
|
- Confirmation in the re-domiciliation form
|
| 4. |
Solvency
- The applicant will be solvent (i.e., able to pay its debts within the period of 12 months beginning on the application date).
- The applicant is not in liquidation or being wound up and no such proceeding is ongoing or pending.
|
- Audited / non-audited financial statements as at a date no earlier than 12 months prior to the application date
- Legal Opinion on (ii)
- Director's certificate on (i) and (ii)
|
| 5. |
Protection of creditors and shareholders' consent
- The re-domiciliation application must be made in good faith and not be intended to defraud the company's existing creditor(s).
- The shareholders must consent to the re-domiciliation either (a) as required under the law of the original domicile or the applicant's constitutional document(s); or (b) by a resolution duly passed by at least 75% of the eligible shareholders.
|
- Certified copies of the constitutional documents and the resolution duly passed (where applicable).
- Confirmation in the re-domiciliation form on (i) and (ii)
- Legal Opinion on (ii)
- Director's certificate on (i) and (ii)
|
Application process
The Registrar of Companies ("Registrar") will be responsible for administering and approving applications for re-domiciling to Hong Kong. The government has indicated that approvals will generally be granted within two weeks of receiving all required information and documents.
Upon successful application, the applicant will be registered in the Companies Register and available for public inspection. The Registrar will issue a certificate of re-domiciliation to the applicant, from which date the re-domiciliation will take effect.
The re-domiciled company will be required to provide evidence of deregistration in their original place of domicile to the Registrar within 120 days from the date of re-domiciliation. Failure to do so within the specified time may result in the registration in Hong Kong being revoked.
Effect of re-domiciliation
Legal effect
For the purposes of the laws of Hong Kong, a re-domiciled company will be regarded as a company incorporated in Hong Kong with effect from its re-domiciliation date. A re-domiciled company would have the same rights and obligations as any other Hong Kong incorporated company of its kind and be required to comply with the relevant requirements under the CO.
No new legal entity is created by the re-domiciliation (i.e., the re-domiciled company will retain its original legal identity as a body corporate and thereby its continuity as a legal entity). It will not affect the property, rights, obligations and liabilities nor contractual or legal processes (including any legal proceedings by or against the foreign company) of the re-domiciled company.
Tax implications
The proposed re-domiciliation regime will not change the general tax principle that Hong Kong profits tax is generally only chargeable on Hong Kong sourced profits arising in or derived from a business carried on in Hong Kong.
Although the Inland Revenue Ordinance will be amended to deem a re-domiciled company to be a Hong Kong incorporated company for tax purposes, the re-domiciled company will only assume Hong Kong related tax obligations if it also carries on a business in Hong Kong.
To provide greater certainty over the expected Hong Kong tax implications once a re-domiciled company begins to carry on a business in Hong Kong after the re-domiciliation, new rules will also be introduced to codify the determination of allowable deductions for trading stock, specified types of expenditures, and depreciation allowances where the acquisition took place before the re-domiciliation. To the extent that the re-domiciled companies are liable to pay foreign income or profits tax on any deemed gain or profit in its original home jurisdiction due to the re-domiciliation, tax credits will also be permitted (subject to specific conditions) to prevent double taxation when the gain or profit is subject to Hong Kong profits tax at a future disposal or transfer after the re-domiciliation.
In regard to stamp duty, since the re-domiciliation process will not involve any transfer of assets or change in the beneficial ownership of assets, it should not give rise to a charge to Hong Kong stamp duty.
Insurance companies and authorized institutions
The proposed re-domiciliation regime may be particularly attractive to authorized insurers in the insurance sector and authorized institutions (AIs) in the banking sector which were initially incorporated outside of Hong Kong for regulatory reasons.
Under the proposed regime, the Insurance Ordinance and the Banking Ordinance will be amended to the effect that a re-domiciled authorized insurer or an AI which has fulfilled its obligations of deregistration from its original domicile will be treated as if it were incorporated in Hong Kong and regulated as such.
Insurers and AIs (as well as AI holding companies and approved money brokers) planning to re-domicile to Hong Kong are required to approach their respective regulators (i.e., the Insurance Authority and the Hong Kong Monetary Authority (HKMA) respectively) in Hong Kong to obtain their non-objection (in the case of insurers) and their approval (in the case of HKMA-regulated entities) before making a re-domiciliation application.
In addition to the Insurance Ordinance and the Banking Ordinance, the Bill also provides for consequential amendments to various other financial services-related legislation such as, for example, the Securities and Futures Ordinance, the Payment Systems and Stored Value Facilities Ordinance, the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, and the Financial Institutions (Resolution) Ordinance.
Concluding remarks
Business groups looking to re-domicile to Hong Kong should plan ahead and seek professional support to fully understand the legal and tax implications to the company, the business and its directors and employees, and for a seamless transition with minimal disruption to the business operations.
We have offices globally to help you take advantage of Hong Kong's robust regulatory framework, strong financial infrastructure, simple tax regime and nexus to Greater China.
- Corporate: Reorganization and office relocation including compliance on transfer of assets and liabilities
- Regulatory: Compliance with requirements of (among others) the Insurance Authority, the HKMA, Securities and Futures Commission or the Hong Kong Listing Rules
- Tax: Tax planning to mitigate and avoid tax leakages arising from exiting the originating jurisdiction and entering Hong Kong upon re-domiciliation.
- Employment: Relocation of employees and any employment and immigration issues
- Intellectual Property: Registration and maintenance of IP rights; address data privacy and cross-border data transfer concerns
