EU removes HK from tax cooperation watchlist

The city’s removal follows the implementation of a new foreign-sourced income exemption regime.

The government announced that Hong Kong has been removed from the European Union's (EU) tax cooperation watchlist, signalling recognition of its adherence to international tax standards.

Hong Kong’s removal follows the implementation of a new foreign-sourced income exemption regime (FSIE) in January 2024.

In December 2022, the EU included disposal gains under the FSIE regime, subjecting relevant taxpayers to economic substance requirements. Jurisdictions with ongoing FSIE reforms, including Hong Kong, remained on the watchlist until legislative amendments were completed.

Hong Kong's revised regime expands the scope of eligible assets.

“We are pleased to note that the EU has recognised our efforts in this regard and removed Hong Kong from the watchlist. Hong Kong will continue to comply with international tax standards while maintaining tax competitiveness," said Christopher Hui, secretary for Financial Services and the Treasury.

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