Hong Kong attracts business with a number of advantages: it has a double taxation avoidance agreement with Russia, tax benefits are provided, and company maintenance costs remain relatively low. However, redomiciling to Hong Kong also carries a number of risks, from the lack of established practice in applying this regime to potential restrictions from banks.

Chuck Peng, Head of KKMP China Desk, comments for Kommersant:

The redomiciliation regime in Hong Kong offers Russian-affiliated companies opportunities for global integration, tax planning, and enhancing business reputation. Hong Kong has openly stated that it will not follow any Western sanctions against Russia, at least at the governmental level. However, large banks in Hong Kong, mainly Chinese and British, fear secondary sanctions and are reluctant to conduct transactions with a “Russian connection.”

 

The requirement to disclose the ultimate beneficial owner for Hong Kong companies could even exacerbate the problem, as banks may require the redomiciled company to reveal information.