Is my Hong Kong company tax resident in Australia?

Hong Kong is a highly attractive base for international businesses, particularly those trading across Asia. With over 1,400,000 registered companies, its modern infrastructure, legal system, and banking environment make it a top choice. Hong Kong’s Companies Ordinance requires every company to have at least one named individual director.

When business owners relocate from Hong Kong to Australia, they should appoint a replacement director to maintain overseas Central Management and Control (CM&C). Larger companies often have the resources to hire a full-time local director. For smaller or less operationally intensive companies, an external party must be engaged to serve as the director.

From a tax perspective, the key reference point when considering a cross-border matter is the Double Tax Agreement (DTA) between the two relevant countries. However, the Australia-China DTA does not extend to cover Hong Kong and therefore a company can be exposed to tax in both if it is deemed tax resident in Australia. The central question is therefore whether your Hong Kong incorporated company is taxable in Australia.

We cover the question of CM&C in greater depth here.

If the company uses a nominee director in Hong Kong who does not exercise genuine control, it may not be sufficient to establish overseas management which would therefore mean that the company is:

  • Taxable in Hong Kong at 16.5% (due to its permanent establishment there); and

  • Taxable in Australia at 30% (or 25% for base rate entities)

With no DTA in place the tax payer would rely upon the foreign income tax offset (FITO) which would generally apply resulting in an effective tax exposure of:

  • 16.5% in Hong Kong, and

  • 13.5% (or 8.5%) in Australia,
    for a combined rate of 30%.

This exposure applies annually for each year the company is deemed to be centrally managed from Australia.

If you are an Australian tax resident with a Hong Kong incorporated company, it is essential to review whether the entity is still managed and controlled offshore. Where changes are needed, ONUS Directors can assist in reviewing your structure and helping you mitigate unnecessary Australian tax exposure.

Previous
Previous

Is my BVI company tax resident in Australia?

Next
Next

Is my Singapore company tax resident in Australia?