One Country, Two Systems : The ending of Hong Kong’s autonomous era
For many years, Hong Kong has been deemed as one of Asia’s unrivalled financial hubs due to the tax planning and investment opportunities, high quality infrastructure and relatively low tax rates, however, the recent imposition of Mainland China’s security laws have threatened the former British Colony’s status as a leading financial center in addition to diminishing the cities “one country, two systems” principle. These security laws target crimes and acts of secession, subversion, terrorism and collusion with foreign forces to endanger national security which is punishable by a maximum of life imprisonment. The US Secretary of State stated : “Hong Kong demonstrated to the world what a free Chinese people could achieve – one of the most successful economies and vibrant societies in the world” it was also stated that “The Chinese Communist Party’s decision to impose draconian national security legislation on Hong Kong destroys the territory’s autonomy and one of China’s greatest achievements”.
This unprecedented, turmoil filled period is undoubtedly traumatic and unsettling but what does this mean for residents of Hong Kong?
Residents of Hong Kong that are seeking ways to escape Mainland China’s arbitrary legislation will be faced with many challenges as well as substantial risk associated with fleeing the city. Many individuals are hunting for residency and investment opportunities outside of Hong Kong, some are even willing to relocate to jurisdictions that impose higher tax rates than Hong Kong – however the severity of the geopolitical crisis is causing the residents of Hong Kong to critically re-evaluate their livelihood and relinquish residing there.
Several jurisdictions around the world have created citizenship pathways for residents of Hong Kong that are fleeing China’s security laws. The Prime Minister of the United Kingdom said, “Hong Kong’s freedoms were being violated by a new security law and those affected would be offered a ‘route’ out of the former UK colony”. The UK, like other jurisdictions, have imposed tax higher tax rates for individuals that fall within particular tax bands and while this may be an initial solution to the influx of Hong Kong residents, it simply is not a viable long-term solution.
As one of the Caribbean’s leading jurisdictions, Barbados is an attractive, viable option for people that wish to leave Hong Kong due to its ;
- Political, economic and social Stability
Barbados is one of the most politically stable jurisdictions in the Caribbean. Its long
history of steady growth and high global reputation of political, economic and social
stability have provided a perpetual foundation for the establishment and operation
of international business and wealth management platforms.
Its parliamentary system has existed since 1639, therefore making it one of the
oldest in the world. Barbados has a Westminster style democracy and the Central
Bank of Barbados is the prudential regulator. As an independent country, Barbados
maintains High Commissions in Venezuela, Brazil, USA, UK and Canada among many
- Tax incentives ,treaties and residency options.
Barbados is the only jurisdiction in the Caribbean with an extensive double tax treaty
network, which includes the UK, USA and Canada. The extensive list of double taxation
agreements provide nationals of Hong Kong with international tax planning
opportunities and benefits, all of which can be tailored to protect their wealth.
Owner managers and entrepreneurs who establish and manage their wealth management
platforms and adopt residency in Barbados are only subject to < 5% tax on income that is
remitted to Barbados for living. This alone makes Barbados the ideal jurisdiction to reduce
costs of establishing and operating international business and wealth management
Barbados’ work permits can create an entry to residency in Barbados. Non-national clients
can set up their own company and apply for a 3-5 year work permit. After 7 years, the client
can apply for permanent residency and will by default be entitled to certain tax incentives
and advantages. Obtaining a work permit has many benefits including declaring tax
residency in Barbados. It also allows applicants to travel to and from Barbados freely during
the duration of the permit.
Once an individual becomes a resident of Barbados, they are only subject to pay taxes at a
rate of <5% on income remitted to Barbados for living. All other non-Barbados sourced
income is tax fee and corporation tax on taxable business income is less than 5%.
- Prime location
Barbados’ prime location makes it a hub for international business and wealth management for international business owner’s who’s client base is in Latin America and North America. Hong Kong individuals can access and serve both the US and Canadian markets via their international business company structures that are centrally managed and controlled from Barbados.
- Exclusive Special Entry Permit program
The Immigration department of Barbados have developed a “Special Entry Permit” which is available to HNWI non-nationals who wish to visit Barbados for an indefinite period of time whilst having the flexibility and choice to arrive in and depart Barbados freely. This exclusive Special Entry Permit is particularly attractive to nationals that are fleeing Hong Kong because ;
- There are no limits on length-of-stay while visiting Barbados
- There is no need to extend length-of-stay
- There is no need for ongoing visits to the Immigration Department
- Permit holders have the freedom to arrive and depart Barbados as you please
- If you are over 60 years of age, the SEP will be valid for your entire lifetime
- If you are under 60 years of age, only one renewal is required when you turn 60
- Permit fees are only payable upon approval of the SEP
- Robust legal and regulatory framework
Over the years, Barbados has developed a robust legal and regulatory framework for the international business and wealth management industry. These developments have aided in the stringent and uncompromising law and guidelines as it relates to international business operation and compliance. Barbados is a well-regulated jurisdiction and is considered to be transparent and cooperative internationally.
- There are no restrictions with regards to ownership of real estate by non-nationals.
- There is no capital gains tax
III. There is no inheritance/estate tax
- There is no wealth tax.
- These advantages mean that Hong Kong HNWIs are able to enjoy their wealth and regain financial freedom.
There is ample, longstanding opportunity in Barbados for residents that are seeking to flee Hong Kong due to the geopolitical crisis. Apart from the tax planning incentives and opportunities, Barbados is one of the safest destinations in the Caribbean and is an ideal jurisdiction for Hong Kong residents and their families to to move to due to its family- oriented nature.
Its no surprise that Barbados has a substantial expat community as the benefits to relocating to the gem of the Caribbean sea are truly invaluable.
By Rianna Holas
Private Client Advisor