Doing Business in Asia: Aligning Business Strategy and Tax Compliance with a Hong Kong-company – Collaboration with Dutch Law Firm Buren

For Dutch companies expanding into Asia, the Netherlands-Hong Kong corporate structure remains a well-established framework. However, in today’s regulatory environment, global compliance and objectively verifiable business functions are just as critical as tax optimization.

In this article, Kenneth, Tax Partner at our firm, and Linda van de Reep, Partner at Buren, explore the modern principles for a compliant structure that aligns governance with predictable tax treatment between the Netherlands and Hong Kong.

Hong Kong follows a territorial source principle, meaning only profits that arise in or are derived from Hong Kong are taxable. This allows Dutch-owned subsidiaries to allocate profits to where business activities (e.g., manufacturing, sales, services) actually occur — provided proper documentation proves the source of the income is genuinely outside Hong Kong.

However, passive foreign-source income may still be taxable unless exemptions apply.

Transactions between a Dutch parent and its Hong Kong subsidiary must follow the arm’s length principle, ensuring fair market pricing. Profit allocation depends on: (1) functions performed; (2) risks assumed; and  (3) value contributed.

A comprehensive functional analysis and reliable benchmarking is essential to satisfy both Dutch and Hong Kong tax authorities.

🔗 Read the full article here.

If you have any queries on cross-border tax structuring, please contact us at info@kyimtax.com.