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December 20, 2024, Hong Kong Government Gazette (Amendment) (No. 2) 2024 (“”bill”) introduces the introvert reintroduction system that Hong Kong expects. The bill introduced it to the Legislative Council on January 8, 2025 and, after its enactment, will enable non-Hong Kong-based companies to relocate their residences to Hong Kong while maintaining their laws Identity and business continuity.
The proposed re-decomposition system only allows for inward re-introduction, providing a mechanism for companies that are not broad-based to integrate companies into Hong Kong. It applies to companies currently designated in the Company Ordinance (CO) (or comparable types in the original residence):
- Private Company Limited Stocks
- Listed companies with limited shares
- Private unlimited company with equity capital
- Public unlimited companies with equity capital
Companies that do not include equity restrictions limit companies and other types of companies that are not specified in CO.
The proposed Hong Kong re-decomposition regime is more flexible than comparative jurisdictions such as Singapore: (1) No economic material testing is conducted on foreign companies so that foreign companies are eligible for the proposed regime (e.g., in terms of total value, assets, income amounts or employees number of people); (2) Not limited to companies that are limited to stocks.
Applicants must comply with the following requirements to redirect to Hong Kong:
| Key Requirements | Key support files/information | |
| 1. | Comply with the laws of its consolidated jurisdictionThe law of the applicant’s original location must allow for redivision to other jurisdictions and the applicant must comply with applicable legal requirements. Under the original residence law, the type of company must be the same as or substantially the same as the original residence law. The expected company type | Legal opinion of legal practitioners, the law engages in the law of the applicant’s merger law (“Legal opinion“)on(i) and (ii) confirmation with the reintroduction form of (i) and (ii) certificates of directors confirmation |
| 2. | Minimum deadlineThe applicant must establish at least one financial year on the date of application. | Certified copy of InformationLegal Opinion Director Certificate |
| 3. | uprightThe reallocated companies must not be intended to be used for illegal purposes or engage in activities that violate the public interest, otherwise it will endanger Hong Kong’s national security. | Reintroduction form confirmation |
| 4. | SolvencyThe applicant will be solvency (i.e., able to repay his debt within 12 months of the application date). The applicant is not liquidated or in trouble and is not ongoing or pending. | Audited/unaudited financial statements No earlier than 12 months Before applying for the certificate of director (i) and the certificate of director (i) |
| 5. | Protect creditors and shareholders’ consentReintroduction application must be made honestly and does not intend to deceive the company’s existing creditors. Shareholders must agree to reintroduction (a) constitutional documents required by (a) under the original domicile law or applicant’s law; or (b) adopt a formally adopted resolution At least 75% Qualified shareholder. | A confirmation in the certified copy of the constitutional document and the re-introduction form of the (i) and (i) and (ii) certificates of directors on (i) and (i) and (ii) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i |
Company Registrar (“Register”) will be responsible for managing and approving the application for re-decomposition to Hong Kong. The government said that approval will usually be obtained within two weeks of receiving all necessary information and documents.
After successful application, the applicant will register in the company registration and conduct a public inspection. The re-introduction certificate will be issued to the applicant, and the re-introduction will take effect from then on.
The reassigned company will be required to provide evidence of degradation to the registrar in the original residence within 120 days from the date of reassignment. Failure to do so for a specified time may result in the revocation of Hong Kong registration.
Legal effects
For the purposes of Hong Kong law, a reconstituted company will be deemed to be a company established in Hong Kong and the re-statement date is valid. A refouls company will have the same rights and obligations as any other Hong Kong company of any similar company and must comply with relevant requirements under the CO.
Reintroduction of no new legal entity created (i.e., the reconstructed company will retain its original legal identity as the company’s company, thus continuity as the legal entity). It does not affect the property, rights, obligations and responsibilities of the redistributed company, or contracts or legal proceedings (including any legal action by foreign companies).
Tax Impact
The proposed re-entrusted system does not change the general tax principle, that is, Hong Kong profit tax is usually charged only for profits in Hong Kong or originated from a business in Hong Kong.
Although the Inland Tax Ordinance will be amended to be considered as a reorganized company for tax purposes as a company of a Hong Kong company, if a business will also be engaged in Hong Kong, the re-signed company shall only bear the tax obligations related to Hong Kong.
To provide greater certainty about the expected meaning of Hong Kong taxation, once a rebuilding company begins to start doing business in Hong Kong after re-ruling, new rules will be introduced to compile the determination of allowable deductions for stocks in re-introduction Types of expenditures and depreciation allowances for previous acquisitions. The re-signed company is responsible for paying foreign income or profit tax for any tax or profit re-entrusted within its original family jurisdiction, and will also allow tax credits (eligible for certain conditions) to prevent profit tax in Hong Kong when the income or profit is subject to profit tax in Hong Kong When the future is disposal or transfer is transferred after the transfer, double taxation.
Regarding stamp duty, the Hong Kong stamp duty charges should not arise as the re-entrusted procedure does not involve any transfer of assets or changes in ownership of the assets.
Insurance companies and authorized agencies
The proposed re-entrusted regime may be particularly attractive to authorized insurance companies in the insurance sector and banking authorized institutions (AISs) that were initially included outside Hong Kong for regulatory reasons.
Under the proposed regime, insurance regulations and banking regulations will be modified so that a reassigned authorized insurer or an AI that has fulfilled its original residence exit obligation will be deemed to be included in Hong Kong. And therefore regulated.
Insurance companies and AIS (as well as AI Holdings and approved currency brokers) plan to contact their respective regulators (IE, Insurance Authority and Hong Kong Monetary Authority (HKMA)) in Hong Kong, respectively, and require contact in Hong Kong. Before making a reintroduction application, it is subject to its non-examination (for the insurer) and its approval (for the HKMA reconciliation entity).
In addition to the Insurance Ordinance and Banking Regulations, the bill provides for the corresponding amendment of the money laundering and Counter-terrorism financing regulations and the Financial Institutions (Resolutions) regulations for legislation related to various other financial services.
Business groups that wish to recomply with Hong Kong should plan ahead and seek professional support to fully understand the legal and tax implications for the company, the business, its directors and employees, as well as the seamless transition to business operations.
We have offices around the world to help you leverage Hong Kong’s strong regulatory framework, strong financial infrastructure, simple taxation systems and connections to the Greater China.
- Corporate: Restructuring and office relocation, including compliance with transfers of assets and liabilities
- Supervise: Comply with (among other) requirements of the Insurance Authority, HKMA, Securities and Futures Commission or Hong Kong Listing Rules
- Tax: Tax plan to mitigate and avoid tax leaks caused by withdrawing from original jurisdiction and enter Hong Kong after reintroduction.
- Employment: Relocating employees and any employment and immigration issues
- intellectual property: Registration and maintenance of IP rights; solve the problems of data privacy and cross-border data transmission
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