On 28 October 2022, the Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced Income) Bill 2022 was gazetted which introduces refinement on the Foreign-Sourced Income Exemption (FSIE) regime on the four types of offshore passive income: (1) Interest income; (2) Dividend income; (3) Disposal gain (on equity interest); and (4) Intellectual Property ("IP") income. The target enforcement date is 1 January 2023.  Under the FSIE regime, these four types of passive income will be deemed to be taxable in Hong Kong under certain circumstances. Active income, such as trading profits and service income, are not covered under the FSIE regime.

The refined FSIE regime only targets the Hong Kong constituent entities of multinational enterprise (MNE) groups carrying on a business in Hong Kong. It also specifically targets passive income that is received in Hong Kong.

VAT for partially exempt businesses, such as those in the finance, insurance, health and welfare and land sectors, does not come without its complexities. One of these is the distinction between overhead costs and residual costs when it comes to deduction of VAT. In this article, we share the details of the Royal Opera House Covent Garden Foundation case, which provides welcomed guidance on this issue and helps those grappling with the thorny question of deduction of VAT on costs, to understand the tests to apply when considering entitlement to VAT deduction.

As businesses are significantly impacted by COVID-19, we review here what employers should consider in relation to pension benefits to ensure that they are not in breach of regulations. We also answer some frequent queries received from our clients as we support them.

The actual implementation date will be 1st April 2019.  When the new VAT rates are implemented, they shall be changed to 13%, 9%, 6% and 0% accordingly.