Hong Kong Funds May Gain Profits Tax Exemption Under New Proposals

by Mary Swire, Tax-News.com, Hong Kong

15 January 2004

Hong Kong’s Secretary for Financial Services and the Treasury, Frederick Ma (pictured), announced on Wednesday the launch of a one-month consultation period on a proposed amendment to the city’s tax law, that will exempt locally-based funds from paying profits tax and "promote the development of the fund management industry in Hong Kong."

"The proposal, announced by the Financial Secretary in the 2003-04 Budget, aims to reinforce the status of Hong Kong as an international financial centre by increasing its attractiveness to offshore fund managers," noted Mr Frederick Ma, the Secretary for Financial Services and the Treasury.

"This legislative amendment exercise will bring Hong Kong into line with major international financial centres such as New York and London where offshore funds meeting specific requirements are not subject to tax," he added.

According to a government statement: “The proposed amendments to the IRO seek to exempt fund entities and non-fund entities resident outside Hong Kong from profits tax in respect of any income derived from transactions undertaken in Hong Kong through a broker or an approved investment adviser. To prevent round-tripping by local funds, anti-avoidance measures are also proposed.”

Mr Ma continues: "Granting profits tax exemption to trading gains of offshore investors would help promote the development of the fund management industry in Hong Kong. We look forward to receiving market comments on the proposed legislative amendments."

"Subject to the outcome of the consultation, we will work towards an early introduction of the Inland Revenue (Amendment) Bill into the Legislative Council," he stated.

Recommended