HK Report Released On Enhancing The SAR’s Appeal
Hong Kong’s Financial Services Development Council (FSDC) has released a report setting out recommendations on policies, including tax measures, to help Hong Kong capitalize on the increasing number of Chinese enterprises looking to invest and expand overseas.
Introducing the report, “Chinese Enterprises ‘Going Global’: Opportunities and Hong Kong’s Policy Responses,” FSDC Chairman Laura M Cha said: “As the leading international financial and business center in China, Hong Kong is poised to benefit by being the key facilitator for Chinese enterprises’ going global process. Hong Kong must consolidate its role as the ‘super-connector’ to help Chinese enterprises in expanding to the relevant markets covered by the ‘going global’ initiative.”
It points out that Hong Kong has been a popular platform for Chinese enterprises expanding overseas, acting as a conduit for over half of the Mainland’s outbound foreign direct investments. The number of Chinese companies setting up operations in Hong Kong has been rising and reached 957 by the end of last year.
Noting the concessionary measures available in China’s newly approved free trade zones, the report says that Hong Kong should seek to maintain its position as the “business hub of choice for enterprises with overseas aspirations” by strengthening its core advantages.
The FSDC report sets out several recommendations, including that the Government should sign more new double taxation agreements (DTAs), especially with those jurisdictions of key importance for Chinese investors, such as Russia and India.
To help private equity funds, it suggests that the Government should expedite approval of a proposal to expand the profits tax exemption for offshore funds to include transactions in private companies that are incorporated or registered outside Hong Kong and which do not hold Hong Kong property or carry out business in Hong Kong. In addition, the Government should push forward the introduction of the open-ended investment company structure to attract more traditional funds to be based in Hong Kong, it says.
It also recommends that the Government quickly clarify the requirements for the profits tax deduction, which can be used against interest expenses, for corporate treasury activities.
