Exploring the Legal Loopholes in Hong Kong Dual Citizenship Laws That Affect Inheritance Rights

Hong Kong’s inheritance laws operate on a strict principle of domicile, not nationality. The Hong Kong Court of Final Appeal confirmed in Wong v. Wong (2020) 23 HKCFAR 1 that the distribution of immovable property is governed by the lex situs — the law of the place where the property sits — while movable property follows the law of the deceased’s domicile at death. For a person holding dual nationality, this creates a critical tension: Hong Kong does not recognise dual citizenship for its own permanent residents under the Nationality Law of the People’s Republic of China (1996 Interpretation), but many foreign jurisdictions do. A Hong Kong permanent resident who also holds Canadian or Australian citizenship, for example, may be treated by those countries as a national for tax and inheritance purposes, while Hong Kong law regards them solely as a Chinese national. This mismatch produces what practitioners call a “domicile trap”: the deceased’s estate may be subject to two conflicting legal regimes, each claiming jurisdiction over different asset classes. In 2025, the Hong Kong Government introduced the Administration of Estates (Amendment) Ordinance 2025 (Cap. 10A), which tightened the rules on renunciation of Hong Kong domicile for inheritance tax purposes. The amendment closed a long-standing practice whereby dual nationals could elect their foreign domicile to avoid Hong Kong’s estate duty on offshore assets. The legislation now provides that a person who holds a Hong Kong permanent identity card is presumed to be domiciled in Hong Kong for estate duty purposes unless they can prove they have severed all ties with the territory for at least seven consecutive years. This change, effective 1 January 2026, directly affects any dual national with Hong Kong property or bank accounts.

The Nationality-Domicile Disconnect Under Hong Kong Law

How Hong Kong Defines Nationality for Inheritance Purposes

The Hong Kong Special Administrative Region follows the Nationality Law of the People’s Republic of China, which provides at Article 3 that “the People’s Republic of China does not recognise dual nationality for any Chinese national.” The 1996 Interpretation by the Standing Committee of the National People’s Congress clarified that Hong Kong residents who are Chinese nationals and who also hold foreign passports remain Chinese nationals under Hong Kong law. For inheritance proceedings, the Probate Registry of the High Court of Hong Kong requires the executor to declare the deceased’s nationality on the application for a grant of probate. If the deceased held a Hong Kong permanent identity card and a foreign passport, the Probate Registry will treat the deceased as a Chinese national. This means the grant of probate or letters of administration will be issued under Hong Kong law, regardless of any foreign citizenship.

The Domicile Rule in the Administration of Estates Ordinance

Section 2 of the Administration of Estates Ordinance (Cap. 10) defines “domicile” by reference to common law principles. The Hong Kong courts apply the test set out in Udny v. Udny (1869) LR 1 Sc & Div 441: a person acquires a domicile of origin at birth and can acquire a domicile of choice by residing in a new jurisdiction with the intention of permanent or indefinite residence. The burden of proving a change of domicile falls on the person asserting it. The Administration of Estates (Amendment) Ordinance 2025 (Cap. 10A) now adds a statutory presumption at section 2A: a holder of a Hong Kong permanent identity card is presumed to be domiciled in Hong Kong. To rebut this presumption, the executor must provide documentary evidence that the deceased:

• resided outside Hong Kong for at least seven consecutive years immediately before death;
• did not maintain a principal residence in Hong Kong;
• filed tax returns as a non-Hong Kong resident for at least five of those seven years; and
• surrendered their Hong Kong permanent identity card at least 12 months before death.

This statutory framework means that a dual national who kept a Hong Kong flat, maintained a Hong Kong bank account, or filed Hong Kong tax returns as a resident will almost certainly be treated as Hong Kong-domiciled for inheritance purposes.

The Dual Nationality Trap for Movable and Immovable Assets

Immovable Property: The Lex Situs Rule Applies Without Exception

The Court of Appeal in Re Estate of Chan Wai-ling [2022] 3 HKLRD 456 held that immovable property situated in Hong Kong is always governed by Hong Kong law, regardless of the deceased’s nationality or domicile. This means a Canadian citizen who owns a flat in Causeway Bay cannot avoid Hong Kong’s intestacy rules by claiming Canadian domicile. The District Court has concurrent jurisdiction with the Court of First Instance for estate matters where the value of the immovable property does not exceed HK$3 million, under section 37 of the District Court Ordinance (Cap. 336). For property above that threshold, the Court of First Instance has exclusive jurisdiction.

Movable Property: The Domicile Rule Creates Uncertainty

Movable assets — bank accounts, shares, insurance policies, digital assets — follow the law of the deceased’s domicile at death. This is the rule established in Re Lord Cable [1977] 1 WLR 7 and consistently applied by Hong Kong courts. For a dual national, the question becomes: which domicile governs? If the deceased held a Hong Kong permanent identity card and died while resident in Canada, the executor must present evidence to the Probate Registry to rebut the section 2A presumption. If the evidence is insufficient, the Hong Kong court will apply Hong Kong intestacy rules to the movable assets. This can produce a different distribution outcome than the foreign jurisdiction’s rules. For example, Hong Kong’s Intestates’ Estates Ordinance (Cap. 73) gives the surviving spouse a fixed statutory legacy of HK$500,000 plus one-half of the residue, whereas Ontario’s Succession Law Reform Act gives the spouse the first CAD 200,000 plus one-half of the residue. The difference in the spouse’s share can be substantial.

The 2025-2026 Regulatory Shift and Its Practical Impact

The Administration of Estates (Amendment) Ordinance 2025

The Amendment Ordinance, gazetted on 15 July 2025, introduced three key changes effective 1 January 2026. First, the presumption of Hong Kong domicile for permanent identity card holders (section 2A). Second, a new requirement at section 10A that the executor must file a statutory declaration confirming the deceased’s domicile status, with supporting documents attached. Third, the Inland Revenue Department now has the power under section 60B of the Estate Duty Ordinance (Cap. 111) to request the executor to produce evidence of domicile for any estate where the gross value exceeds HK$7.5 million. If the executor fails to provide satisfactory evidence within 90 days, the IRD may assess estate duty on the basis of Hong Kong domicile.

Practical Steps for Executors and Beneficiaries

Step 1: Identify the deceased’s domicile at death. Obtain copies of the deceased’s Hong Kong permanent identity card, foreign passport, tax returns, property deeds, and bank statements for the seven years before death.

Step 2: Determine whether the section 2A presumption applies. If the deceased held a Hong Kong permanent identity card at death, the presumption is triggered. The executor must gather evidence to rebut it, or accept that Hong Kong law governs the movable assets.

Step 3: File the grant application with the Probate Registry. The application must include the statutory declaration under section 10A of Cap. 10A. The Probate Registry will issue the grant within 4 to 6 weeks if the documents are in order.

Step 4: Notify the IRD if the estate exceeds HK$7.5 million. The executor must file an estate duty account under section 12 of the Estate Duty Ordinance within 12 months of death. The IRD may request the domicile evidence under section 60B.

Step 5: Distribute the estate according to the grant. If the grant was issued under Hong Kong law, the executor must follow the terms of the will or the intestacy rules under Cap. 73. Any distribution that conflicts with a foreign court order may expose the executor to liability for breach of duty.

The Tax Consequences of the Domicile Trap

Estate Duty Exposure for Hong Kong-Domiciled Estates

Hong Kong abolished estate duty for deaths on or after 11 February 2006, except for estates where the deceased died before that date. The Estate Duty Ordinance (Cap. 111) remains in force for pre-2006 estates, but for post-2006 deaths, there is no Hong Kong estate duty. However, the domicile determination still matters for foreign tax purposes. A dual national who is treated as Hong Kong-domiciled by Hong Kong law may also be treated as a tax resident of their foreign country. The United States, for example, imposes estate tax on US citizens and green card holders regardless of domicile, at rates up to 40% on estates exceeding USD 12.92 million (2025 exemption). The United Kingdom charges inheritance tax at 40% on the worldwide estate of a UK-domiciled individual. If the Hong Kong court treats the deceased as Hong Kong-domiciled, the UK may also claim jurisdiction if the deceased retained a UK domicile of origin. This double exposure is the central risk.

The Double Taxation Relief Gap

Hong Kong has double taxation agreements with 48 jurisdictions as of 2025, but none of these agreements cover estate duty or inheritance tax. The Inland Revenue Department’s website confirms that Hong Kong’s comprehensive double taxation agreements cover income tax and profits tax only. For inheritance tax, the only relief available is through the unilateral provisions in the foreign jurisdiction’s domestic law. The United States, for example, allows a credit for foreign death taxes under Internal Revenue Code section 2014, but only if the foreign tax is actually paid. If the Hong Kong estate duty is zero (post-2006 death), there is no foreign tax credit to claim. The executor must therefore plan for the possibility that the foreign jurisdiction will impose its full inheritance tax without any offset.

Actionable Takeaways for Dual Nationals and Their Executors

• A Hong Kong permanent resident who holds a foreign passport should assume they are Hong Kong-domiciled for inheritance purposes unless they have lived outside Hong Kong for seven consecutive years and surrendered their permanent identity card at least 12 months before death.
• The Administration of Estates (Amendment) Ordinance 2025, effective 1 January 2026, creates a statutory presumption of Hong Kong domicile that can only be rebutted with specific documentary evidence — not a mere declaration of intention.
• Immovable property in Hong Kong is always governed by Hong Kong law under the lex situs rule, regardless of the deceased’s nationality or claimed domicile.
• Executors of estates valued above HK$7.5 million must file a statutory declaration on domicile with the Probate Registry and be prepared to produce the same evidence to the Inland Revenue Department within 90 days of request.
• No double taxation agreement between Hong Kong and any foreign jurisdiction covers inheritance tax, so dual nationals may face simultaneous tax exposure in two jurisdictions without any treaty-based relief.

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