Tax laws will be amended to address EU concerns: govt

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The Hong Kong government on Tuesday said it would amend the city’s tax law by the end of next year, after concerns over “double non-taxation” situations saw the SAR added to a European Union watch list.

The administration said it understood the EU’s concerns, which stem from its non-taxation of certain offshore passive income, such as interest and royalties, but it has already committed to making changes.

He said the Inland Revenue Ordinance will be amended by the end of 2022 and that measures to support the fight against cross-border tax evasion will be implemented in 2023.

The government said the proposed legislative changes would target companies, especially those with no substantial economic activity in Hong Kong, which use passive income to evade tax across a border.

He stressed that financial institutions will not have to pay more taxes, as their offshore interest income is already subject to profit tax, and individual taxpayers will not be affected.

The government said stakeholders will be consulted on legislative changes and authorities will try to minimize the compliance burden on businesses.

“Hong Kong businesses will not be subject to defensive tax measures imposed by the EU due to their inclusion in the tax cooperation watch list,” the government said. “The Hong Kong SAR government will ask the EU to quickly remove Hong Kong from the watch list after amending the relevant tax provisions.

He added that the RAD will continue to adopt the principle of territorial source taxation and maintain a simple, secure and low taxation regime.


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