Germany–Hong Kong Cross-Border Tax Advisory

Potentially yes. Germany's CFC rules under AStG §7 apply when a German taxpayer controls ≥50% of a foreign company and that company earns passive income taxed at less than 25%. HK's 16.5% rate is below 25%, so HK entities with passive income are potentially in scope. The "substance test" (Gegenbeweis under §8(2)) can exempt HK entities that conduct genuine business activities with adequate local management.

Yes — the Germany–HK DTA (2010) covers income from employment, dividends (5% or 15% WHT), interest (0%), and royalties (3%). Germany also grants a foreign tax credit for HK profits tax paid. The DTA significantly reduces the risk of double taxation for businesses operating in both jurisdictions.

Under AStG §6, German residents who hold ≥1% of a corporation (German or foreign) and move abroad are subject to a deemed disposal at fair market value — triggering 25% German CGT (Abgeltungsteuer) on unrealised gains. For moves to non-EU countries like HK, full immediate payment is required (no instalment option). Advance planning before departure is essential.

German taxpayers must notify the Bundeszentralamt für Steuern (BZSt) of acquisitions or disposals of foreign companies, and provide annual information returns for each foreign entity they control. The deadline is 14 months after the relevant tax year ends. Penalties for non-compliance reach EUR 25,000 per case.

German corporate income tax provides a 95% participation exemption on dividends from qualifying subsidiaries (≥15% holding). German trade tax (Gewerbesteuer) also offers a 95% deduction — but only for dividends from subsidiaries in DTA countries. Since HK has a DTA with Germany, dividends from HK subsidiaries should qualify for the 95% trade tax exemption.

A HK intermediate holding company can reduce the overall effective tax rate on APAC income if the HK entity has genuine substance and the income qualifies under HK's territorial system. However, German CFC rules will apply to passive income below 25% effective rate. Active trading or services income in HK (taxed at 16.5% with active substance) avoids CFC attribution.