Hong Kong Emerges as a Viable Alternative to Traditional Tax Havens

As the appeal of traditional tax havens such as Bermuda and the Cayman Islands declines, Hong Kong is positioning itself as a new destination for global multinationals seeking favorable incorporation environments.

Historically, low or zero corporate tax rates and the absence of estate duties made jurisdictions like Bermuda, the Cayman Islands, and the British Virgin Islands highly attractive to companies. However, these advantages are eroding. In recent years, a global tax reform has been phased in, requiring jurisdictions to impose a minimum corporate tax rate of 15 percent on large multinational enterprises with annual revenues of €750 million (US$882 million) or more.

At the same time, financial disclosure requirements in these traditional havens have increased, particularly around the disclosure of annual financial returns and ultimate beneficial ownership. This regulatory tightening has added complexity and cost for companies with operations in Hong Kong but domiciled offshore, subjecting them to double taxation and dual reporting obligations. As a result, many are reconsidering their offshore status and looking to redomicile in Hong Kong to streamline compliance and reduce administrative burdens.

Beyond tax considerations, one of the previous attractions of offshore jurisdictions was their limited disclosure requirements. However, international standards are gradually aligning these with the stricter regimes of onshore financial hubs like Hong Kong, eroding one of the key incentives to stay offshore.

For companies with significant business interests, suppliers, or customer bases in Hong Kong or mainland China, the historical rationale for incorporating offshore is becoming obsolete.

In response, Hong Kong enacted new redomiciliation legislation in May, making it easier for overseas companies to relocate their corporate registration to the city. Previously, such a move required dissolving the original entity and transferring all assets and operations to a newly established Hong Kong entity—a costly and complex process. The new law allows overseas companies to relocate to Hong Kong while maintaining their legal identity, business continuity, and corporate history.

This shift comes at a pivotal time. As changes to global tax rules undermine the appeal of traditional havens, Hong Kong sees an opportunity to promote itself as an international financial centre. Analysts say that the city’s role as a gateway to mainland China is a key draw for companies considering redomiciliation.

In addition to enhancing its competitiveness, Hong Kong aims to use the redomiciliation regime to attract more investment, generate jobs, and stimulate demand for local professional services—contributing to the broader development of its financial markets.

However, Hong Kong is playing catch-up. Singapore implemented a similar regime as early as 2017, allowing overseas firms to relocate their registration while preserving brand identity and corporate continuity. Hong Kong’s new legislation is a necessary step to stay competitive in this global race for corporate domiciliation.

Among Hong Kong’s 175 licensed banks, 123 are incorporated outside the city. Many of these foreign institutions engage in wholesale or private banking operations. While the Hong Kong Monetary Authority has not yet received domicile-transfer applications from banks, officials note that the new redomiciliation framework could eventually attract financial institutions to move their legal base to the city.

The regime is expected to bolster Hong Kong’s status as a global financial hub by enhancing its legal and regulatory attractiveness and expanding its ecosystem of financial services.

In addition to corporations, an increasing number of global fund companies are planning to register in Hong Kong to capitalize on the opportunities presented by the mainland Chinese market.

Only funds domiciled in Hong Kong are eligible to participate in cross-border initiatives such as the Mutual Recognition of Funds (MRF) scheme and the Wealth Management Connect. As these programmes continue to evolve, a growing number of locally domiciled funds are expected to be launched.

To further support this development, the Securities and Futures Commission (SFC) introduced a re-domiciliation mechanism in 2021, enabling overseas corporate funds to relocate their domicile to Hong Kong. This mechanism allows funds to retain their corporate identity, continuity, and performance track record, significantly reducing the costs associated with relocation.

The Hong Kong government is actively promoting this regime in collaboration with InvestHK, Hong Kong Exchanges and Clearing (HKEX), and the city’s network of Economic and Trade Offices.

An increasing number of companies are expected to redomicile in Hong Kong to take advantage of the city’s robust legal system, efficient governance, and competitive tax framework — as well as its strategic position as a gateway to mainland China.