For decades, Hong Kong’s simple, low-tax regime has been a magnet for foreign capital. But as global tax rules are rewritten by the OECD and geopolitical currents shift, is the city’s fiscal model facing its greatest test? The answer lies not in isolation, but in understanding how Hong Kong is strategically adapting its world-class system to remain the premier gateway for investment into and out of Asia. This is the new calculus for global investors.

Hong Kong’s Core Advantages in a Changing World

While other jurisdictions layer on complex incentives, Hong Kong’s power lies in its foundational simplicity and territorial tax system. Profits tax is only levied on Hong Kong-sourced business profits. Crucially, the city imposes no tax on capital gains, dividends, or interest income, and has no sales tax or inheritance duty. This creates a highly efficient environment for holding companies, treasury centers, and investment activities. The recent abolition of all additional stamp duties on property (SSD, BSD, NRSD) as of 28 February 2024 further simplifies the landscape for real estate investment.

The Strategic Response to Global Reform: FSIE & Pillar Two

Hong Kong is not ignoring global changes; it is proactively integrating them. The Foreign-Sourced Income Exemption (FSIE) regime, expanded in January 2024, ensures that offshore dividends, interest, disposal gains, and IP income received in Hong Kong remain tax-free, provided the entity maintains sufficient economic substance in the city. This directly addresses EU concerns while preserving Hong Kong’s attractiveness.

More significantly, Hong Kong has moved decisively on the OECD’s Global Minimum Tax. The Income Inclusion Rule (IIR) and Hong Kong Minimum Top-up Tax (HKMTT) were enacted on 6 June 2025, effective from 1 January 2025. This applies a 15% minimum effective tax rate to large multinational enterprises (MNEs) with consolidated group revenue of €750 million or more. By implementing its own top-up tax, Hong Kong ensures that any additional tax revenue stays in its jurisdiction.

Innovation Within the System: The Family Investment Holding Vehicle (FIHV)

Hong Kong is also creating new, targeted vehicles to attract sophisticated capital. The Family Investment Holding Vehicle (FIHV) regime offers a 0% tax rate on qualifying transactions for single-family offices that meet specific conditions, including maintaining substantial activities and a minimum asset under management (AUM) of HK$240 million in Hong Kong. This positions the city as a leading hub for global family wealth management, competing directly with Singapore and Switzerland.

The Compliance Landscape: Digitalization and Certainty

The Inland Revenue Department (IRD) continues to enhance its digital services, making compliance more straightforward. Tax returns are typically issued in early May each year, with individual filing deadlines around one month later. Hong Kong maintains an extensive network of Comprehensive Double Taxation Agreements (CDTAs) with over 45 jurisdictions, including Mainland China, Singapore, and the UK, providing certainty and preventing double taxation for cross-border business.

Hong Kong’s tax system is evolving not by abandoning its principles, but by reinforcing them with modern safeguards and strategic innovations. For foreign investors, the opportunity lies in engaging with Hong Kong not as a passive low-tax haven, but as a dynamic, rules-based international business hub that is actively securing its place in the new global tax order. The winning strategy is to build substantive, value-adding operations that can fully harness this refined and resilient framework.