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The Hong Kong Government has gazetted the Inland Revenue (Amendment) (No. 3) Bill 2013, aiming to cut down by half the profits tax on captive insurers, and to raise the deduction ceiling for retirement scheme contributions by employees or self-employed persons.
The Bill would reduce by half the profits tax on the offshore risks insurance business of captive insurers that are set up to underwrite the risks of companies within the same group to which the captive insurers belong.
The Government has seen that many large enterprises in Asia are keen to run their own captive insurance companies to insure against their business risks, and wishes to attract more enterprises to form such captive insurance companies in Hong Kong. The proposed measure, an initiative announced in the 2013-14 Budget, plans to give them the same tax concessions as those currently applicable to reinsurance companies.
The Secretary for Financial Services and the Treasury, Professor K C Chan, said that, "with a sound regulatory regime and a broad talent pool, Hong Kong is well positioned to establish itself as a center for captive insurance. Forming a cluster of captive insurers here will help the development of other related businesses, including reinsurance, legal and actuarial services."
Professor Chan pointed out that this would reinforce Hong Kong's status as a regional insurance hub, while making Hong Kong's risk management services more diversified. The potential of Hong Kong as a hub for captive insurers has also been reinforced by a policy promulgated by the Chinese Government in June 2012, encouraging Mainland enterprises to form captive insurers in Hong Kong so as to enhance their risk management.
Subject to the passing of the Bill by the Legislative Council (LegCo), the tax concession measure will take effect from the year of assessment 2013-14.
Another provision of the Bill would raise the deduction ceiling for annual contributions made by employees or self-employed persons to recognized retirement schemes, including the Mandatory Provident Fund (MPF) Schemes, from the current level of HKD15,000 (USD1,935) to HKD17,500 for the year of assessment 2014-15, and to HKD18,000 for the year of assessment 2015-16 and onwards, subsequent to the increase of the maximum relevant income level under the MPF Schemes Ordinance from HKD25,000 per month to HKD30,000 per month, with effect from June 1, 2014.
The Bill will be presented to the LegCo for first reading on January 8, 2014.A comprehensive report in our Intelligence Report series which studies the 20 main offshore jurisdictions which offer captive insurance regimes is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report11.asp
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