What Is the Foreign-Sourced Income Exemption (FSIE) Regime?

The FSIE is a framework that governs how offshore passive income is taxed in Hong Kong, effective from 1 January 2023 (with a refined regime from 1 January 2024).

• Core rule: Specified foreign-sourced income received in Hong Kong by an MNE entity is subject to Profits Tax unless an exemption applies.
• Covered entities: You are a part of a multinational group (MNE) carrying on business in Hong Kong.
• Covered income: Dividends, interest, disposal gains (including equity), and intellectual property income.
• Eligibility for tax exemption: Must satisfy either of the economic substance, participation, or nexus requirements, depending on your income type.
• Special rules: Pure equity-holding entities have lighter substance requirements, while non-pure equity-holding entities must demonstrate substance with employees and premises in Hong Kong.