On October 8, the Hong Kong Department of Internal Revenue published a statement in response to the inclusion of Hong Kong in the EU "grey" list.
The Designated Authority noted that Hong Kong will continue to apply the territorial source taxation principle. The government will continue to maintain our simple, secure and low tax regime in order to maintain a competitive business environment in Hong Kong.
As an international financial center, Hong Kong has actively participated in and supported international tax cooperation from the very beginning. Over the years, Hong Kong has adhered to the principle of territorial source taxation, according to which offshore profits are generally not subject to income tax in Hong Kong.
On October 5, the European Union announced the inclusion of Hong Kong in its "gray" list for monitoring tax cooperation, as it believes that the non-taxation of certain passive income from foreign sources in Hong Kong may lead to situations of "double non-taxation" (double non-taxation).
The "gray" list identifies jurisdictions that have pledged to take action to address issues of concern to the EU and avoid being blacklisted as non-cooperating jurisdictions. The Hong Kong government will ask the EU to immediately remove the country from the gray list.