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The Council of the European Union (EU) added various jurisdictions, including Hong Kong, to Annex II to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes, commonly known as the 'greylist', with effect from 5 October 2021, following a review of their foreign source income exemption regimes. These jurisdictions have until 31 December 2022 to make necessary changes to their legislation in order to avoid being moved to the blacklist.

It is understood that the HKSAR government has been working closely with the EU to understand and address their concerns about Hong Kong's territorial basis of taxation. The government sent a letter to the Code of Conduct Group (COCG) on 24 June 2021 committing to amend Hong Kong's tax system by 31 December 2022 with the amended system taking effect on 1 January 2023 with no grandfathering arrangement.