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Hong Kong's Legislative Council has passed a Bill to amend the Inland Revenue Ordinance to give captive insurance companies, for their offshore risks insurance business, a profits tax concession of 50 percent – equivalent to that given to reinsurance companies.
Leveling the playing field between captives and reinsurance firms will "provide a further impetus for groups or enterprises to consider setting up captive insurers in Hong Kong to underwrite their own risks," Professor K C Chan, the Secretary for Financial Services and the Treasury, said.
"Our fundamental strengths as an international financial center includes a simple tax regime, rule of law, ready supply of talent, free flow of information and capital, and a highly open and competitive operating environment," he continued. "Hong Kong is well positioned to establish itself as a domicile of captive insurance."
Chan pointed out that the development of captive insurance would reinforce Hong Kong's status as a regional insurance hub, while diversifying Hong Kong's risk management services, and promoting the development of other related professional services including reinsurance, accounting, actuarial, and legal services.
This potential is said to be reinforced by a policy promulgated by the Chinese Government in June 2012, encouraging Mainland enterprises to form captive insurers in Hong Kong to enhance their risk management. With Mainland enterprises becoming more internationalized, they will increasingly use captive insurance for reducing insurance costs and better risk management, it was noted.
"We will continue our promotion efforts and leverage our economic and trade networks to attract more enterprises to form captive insurers in Hong Kong," Chan concluded.
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