Hong Kong’s Company Re-domiciliation Regime: What You Need to Know

Hong Kong boasts an open and efficient company governance regime, a reliable tradition of the rule of law, a simple taxation system, and world-class professional services. Its strategic location, along with its extensive commercial and trading networks with both the Mainland and worldwide, makes it highly favorable for corporations managing their operations in the Mainland and across the Asian region.

The company re-domiciliation regime facilitates seamless changes in a company’s place of incorporation to Hong Kong without the need for complicated and often expensive winding-up procedures or court-sanctioned schemes of arrangement. Following a similar mechanism introduced for funds in 2021, Hong Kong will introduce its inward re-domiciliation regime, allowing companies of various types and scales incorporated outside of Hong Kong to shift their place of incorporation to the city. Unlike the similar regime in Singapore, no economic substance test will be required in the legislative updates expected in early 2024. Legislative changes will also provide appropriate safeguards to ensure re-domiciliation can be carried out in a tax-neutral manner, providing greater certainty to re-domiciled companies regarding their tax liabilities in Hong Kong.

The Registrar of Companies will be responsible for approving re-domiciliation applications, ensuring that companies meet specified requirements regarding integrity, member and creditor protection, and solvency. This ensures that companies re-domiciling to Hong Kong maintain good standing. The spirit of the re-domiciliation regime is to ensure that the process does not affect the rights, obligations, liabilities, or contractual and legal processes of the companies. Business continuity for re-domiciling companies is thus guaranteed, without affecting the rights and responsibilities of transaction partners.

Regarding timelines, companies must provide evidence of their de-registration in their original place of incorporation within 60 days of re-domiciliation to Hong Kong. However, it is suggested that 60 days may be insufficient, considering the complexities of de-registration processes in original jurisdictions. It is hoped that the regime will offer flexibility for the Registrar of Companies to extend the de-registration period if justifiable grounds are provided.

The proposed regime streamlines the re-domiciliation process for businesses with an Asia-Pacific focus, without requiring court intervention, winding-up, or re-incorporation processes. It covers five categories of companies and ensures maximum business continuity, with the re-domiciled company retaining its legal identity, rights, obligations, liabilities, property rights, and corporate history.

The Registrar of Companies will administer the regime, approving re-domiciliation applications based on various factors. Following successful re-domiciliation and de-registration from the original place of incorporation, the re-domiciled company must comply with statutory requirements in Hong Kong and obtain relevant licenses if necessary.

The re-domiciliation process should not affect the Hong Kong profits tax liabilities of the re-domiciled company or trigger any change in beneficial ownership of assets, nor should it result in any stamp duty implications. Legislative changes will address transitional tax issues and provide greater certainty and guidance to re-domiciled companies.

Mayon, as a company TCSP licensed secretary with a Hong Kong office, can assist in leveraging Hong Kong’s robust regulatory framework, strong financial infrastructure, simple tax regime, and connection to Greater China.

Please reach out to us at sales@mayon.hk