Revenue Bill Designed To Woo Investors To Hong Kong

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

03 February 2006

Hong Kong's Secretary for Financial Services & the Treasury, Frederick Ma has expressed hope that new legislation exempting offshore funds from profits tax, which is expected to be approved in the first quarter of 2006, will help attract more overseas investors to Hong Kong.

Speaking on a radio talk show on Wednesday, Mr Ma said that the proposal to exempt offshore funds from the 17.5% tax in respect of trading profits derived from qualifying securities transactions carried out in the territory, known as the Revenue (Profits Tax Exemption for Offshore Funds) Bill, will boost Hong Kong's status as an international financial centre.

The financial services industry has long held the view that it is vital for Hong Kong to provide tax exemption for offshore funds, to prevent an exodus of funds to other centres and a loss of market liquidity. Depletion of the fund industry in Hong Kong would also have a detrimental effect on financial services in the city, such as those provided by brokers, accountants, bankers and lawyers.

Hong Kong's main competitors, such as New York, London and Singapore, all exempt offshore funds from tax.

Currently, more than 60% of funds managed in Hong Kong are from foreign investors.

Nonetheless, according to Mr Ma, Hong Kong has moved to eighth place in the world in terms of total market capitalisation, which stands at a value of more than $8.18 trillion. He also expects market capitalisation to be boosted further as more Mainland enterprises seek a listing in Hong Kong.

Mr Ma also revealed that a financial services forum will be held in March to explore opportunities in collaboration with the Pan-Pearl River Delta Region and to encourage the use of Hong Kong's fund-raising and investment services.

The forum is intended to create a "win-win" situation for Hong Kong and Mainland investors, Mr Ma explained.

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