Hong Kong: Added to EU “grey list” for tax purposes
The European Union (EU) has decided to add Hong Kong to Annex II of its list on non-cooperative jurisdictions for tax purposes.
The European Union (EU) has decided to add Hong Kong to Annex II.
Hong Kong will be added to the European Union’s “grey list” on non-cooperative jurisdictions for tax purposes, effective 5 October 2021.
Following a review of foreign-source income exemption regimes, the European Union (EU) has decided to add Hong Kong to Annex II of its list on non-cooperative jurisdictions for tax purposes, effective 5 October 2021. This means that the EU considers that aspects of Hong Kong’s territorial tax system may facilitate tax avoidance or other tax practices regarded as harmful. It also means that Hong Kong has agreed to make changes to the relevant legislation. The EU has granted the affected jurisdictions until 31 December 2022 to make necessary changes.
Annex II is effectively a watchlist—the EU will further monitor the situation and consider moving Hong Kong to a “blacklist” if the identified harmful aspects of its tax system do not change. Punitive measures against blacklisted jurisdictions include denial of deduction of payments made, increased withholding taxes, application of controlled foreign company rules, taxation of dividends, and administrative measures.
Changes to the territorial system in Hong Kong will be one of the most significant changes to Hong Kong profits tax for many years and will have a fundamental effect on the tax profiles of many companies operating.
For more information contact a KPMG tax professional:
Rodney Lawrence | +1 312 665 5137 | email@example.com
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.