The Hong Kong Financial Services and the Treasury Bureau on Tuesday unveiled for consultation a proposal which would exempt non-Hong Kong residents from paying profit tax on income derived from the trading of local securities by offshore funds.
A great many offshore-fund managers had operated in the jurisdiction under the belief that they were exempt from paying any taxes. However, under the SAR's Internal Revenue Ordinance, offshore funds are obliged to pay taxes on profits made as a result of any local exposure to stocks and bonds.
This led to criticisms that the taxation system for offshore funds is unclear, which in turn prompted the authorities to announce in the 2003-04 budget that they would exempt offshore funds from paying profit tax.
According to the Wall Street Journal, which reported on the plan, the main difference between this week's and previous proposals is the fact that there is no requirement for brokers and investment advisers to keep records verifying the non-resident status of each investor in the offshore funds.
A comprehensive report in our Intelligence Report series examining offshore investment, offshore stock exchanges, and hedge funds 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_report9.asp
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