Hong Kong Tax Breaks To Support Financial Center
Hong Kong’s Secretary for Financial Services and the Treasury, K C Chan, has described the various tax policies that the Government intends to pursue in the coming year.
As part of his testimony before the Legislative Council (LegCo) Finance Committee special meeting on the 2015-16 Budget, Chan stressed that the Government is proactively “developing Hong Kong into a full-fledged fund and asset management service center.”
In particular, he reminded the Committee that detailed legislative proposals are being formulated to introduce a new open-ended fund company structure to attract more funds to domicile in Hong Kong. In addition, a bill introduced on March 25 this year will extend the profits tax exemption for offshore funds to private equity funds, with a similar expectation that more private equity funds will then expand into Hong Kong.
He also confirmed that a bill will be introduced into the LegCo, in the next legislative session, that will amend the tax code to allow interest deductions under the profits tax regime for corporate treasury centers and halve profits tax for specified treasury activities.
The Financial Services and the Treasury Bureau (FSTB) will also begin a consultation in the second quarter of this year on the arrangements for implementing the automatic exchange of financial account information (AEOI) in tax matters. The FSTB will introduce the relevant amendment bill in 2016.
Chan stressed that, “as an international financial center, Hong Kong cannot afford to fall behind international developments. Hong Kong has indicated to the Organisation for Economic Cooperation and Development (OECD) our support for implementing the new global standard on AEOI by the end of 2018, after the required legal framework has been put in place.”
“The new global standard has far-reaching implications and involves complicated procedures, including the specific requirements for financial institutions to conduct due diligence and report financial account information, and the sanctions for non-compliance,” he added.
Furthermore, Chan indicated that the FSTB “will continue to make our best efforts to expand Hong Kong’s network of comprehensive agreements for avoidance of double taxation with our major trading and investment partners as well as emerging economies with which we see potential for growth in bilateral trade and investment.”
“On the other hand,” he disclosed, “Hong Kong may enter into stand-alone tax information exchange agreements with other jurisdictions where necessary, so as to meet the international standard.”
