Tax guide
Hong Kong FSIE Regime: What It Means for Offshore Companies
Last updated · Reviewed by the Harbourline Corporate compliance team
| In force | 1 Jan 2023; disposal gains expanded 1 Jan 2024 |
|---|---|
| Who is covered | Constituent entities of an MNE group (no size threshold) |
| Income covered | Dividends, interest, IP income, disposal gains |
| Not covered | Active trading / service profits |
| Main exemptions | Economic substance; participation (dividends/gains); nexus (IP) |
Who is affected
FSIE applies to “MNE entities” — companies that are part of a group with at least one entity or permanent establishment outside Hong Kong — regardless of group size. A Hong Kong company owned by an individual and with no subsidiaries or other group companies abroad is generally not an MNE entity. A Hong Kong company owned by your existing foreign company generally is.
The exemptions
- Economic substance requirement: adequate employees and operating expenses in Hong Kong to carry out the specified economic activities (lighter test for pure equity-holding entities).
- Participation exemption for dividends and disposal gains: generally a holding of at least 5%, plus anti-abuse and subject-to-tax conditions.
- Nexus approach for IP income: exemption in proportion to qualifying R&D expenditure.
Planning point
If you intend to use the Hong Kong company to hold shares, lend money or own IP, tell us when you upload your business profile. We flag FSIE exposure during compliance review so that you can plan substance or choose another structure from the start.
Frequently asked questions
Does FSIE end the Hong Kong offshore company?
No. FSIE targets specific passive income received in Hong Kong by multinational-group entities. Offshore trading and service profits continue to be governed by the territorial source rules.
Official sources
This guide is general information, not tax or legal advice. Hong Kong offshore status is decided by the Inland Revenue Department on the facts of each case, and your country of residence may tax you or the company.