Hong Kong’s reputation as a low-tax, business-friendly hub is built on a foundation of stability. But in a world of rapid international tax reform, is that foundation shifting? For business leaders and investors, the critical question is no longer if Hong Kong’s tax environment will evolve, but how to strategically navigate the changes that are already law. From the enacted Global Minimum Tax to the revamped stamp duty landscape, proactive adaptation is the new competitive advantage.

The New Reality: Enacted Reforms You Must Understand

The landscape has already changed. Several major reforms are not speculative—they are in force. Understanding these is the first step in future-proofing your business.

1. The Global Minimum Tax (Pillar Two) is Now Law

Contrary to being “under review,” Hong Kong formally enacted the Global Minimum Tax framework on June 6, 2025, with an effective date of January 1, 2025. This implements a 15% minimum effective tax rate for large multinational enterprise (MNE) groups with consolidated annual revenue of €750 million or more. The rules include an Income Inclusion Rule (IIR) and a domestic Hong Kong Minimum Top-up Tax (HKMTT).

2. A Dramatically Simplified Property Stamp Duty Regime

A critical update from the 2024-25 Budget: all additional stamp duties on residential property transactions have been removed. As of February 28, 2024, the Special Stamp Duty (SSD), Buyer’s Stamp Duty (BSD), and New Residential Stamp Duty (NRSD) are abolished. Property transfers are now subject only to the Ad Valorem Stamp Duty at scaled rates, starting at HK$100 for properties up to HK$3 million and rising to 4.25% for properties over HK$21,739,120. This simplifies investment calculations and removes a major barrier for non-local buyers.

3. The Expanded FSIE Regime Demands Substance

The Foreign-Sourced Income Exemption (FSIE) regime, expanded in January 2024, is a direct response to international pressure. It taxes foreign-sourced dividends, interest, disposal gains, and intellectual property income received in Hong Kong by multinational entities, unless they meet specific economic substance requirements. This means holding companies and regional headquarters cannot be “brass plate” operations; they must have an adequate level of staff, expenditure, and activities in Hong Kong to justify tax exemptions.

Strategic Levers for Business Resilience

In this environment, strategic tax planning is integral to operational resilience. Here are actionable levers to consider.

Re-evaluate Entity Structures and Substance

The FSIE and Global Minimum Tax rules make substance paramount. Conduct a review: Do your Hong Kong entities have the appropriate level of decision-making personnel, operational costs, and physical presence to support their functions and income streams? For groups near the €750 million revenue threshold, modeling the potential impact of the 15% minimum tax is essential.

Explore New Regimes: The Family Investment Holding Vehicle (FIHV)

Hong Kong is actively creating new, compliant structures to attract capital. The FIHV regime offers a 0% tax rate on qualifying transactions for family offices with at least HK$240 million in assets under management. The catch? It requires substantial activities to be performed in Hong Kong. For eligible families, this provides a powerful, tax-efficient structure that aligns with global transparency standards.

Maintain Rigorous Transfer Pricing Documentation

The draft article’s point is correct: transfer pricing rules apply broadly. The IRD expects contemporaneous documentation for all cross-border related-party transactions (e.g., management fees, goods sold, services rendered, loans). This is not optional for sizable transactions. Proper documentation is your first line of defense in an audit.

Debunking Common Misconceptions

1. “Hong Kong is Introducing a Capital Gains Tax”

Status: Unfounded. There is no official proposal or policy paper from the Hong Kong government suggesting the introduction of a broad-based capital gains tax. Hong Kong’s tax system, as defined by the Inland Revenue Ordinance, continues to exclude capital gains from taxation. This remains a cornerstone of its competitive appeal.

2. “The Abolished Stamp Duties Could Return”

Status: Unlikely in the Short Term. The abolition of the SSD, BSD, and NRSD was a definitive policy shift to revitalize the property market. While future governments could theoretically reintroduce such measures, the current policy direction is firmly towards simplification and reducing transaction costs to bolster Hong Kong’s economic attractiveness.

The future of Hong Kong’s tax policy is not about radical upheaval but strategic evolution. The changes are already here, embedded in law. The businesses that will thrive are those that move from passive compliance to active strategic management—using Hong Kong’s new regimes like FIHV, ensuring robust substance, and understanding the real impact of global rules. In this new era, foresight and adaptability are your most valuable assets.