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Aviation Leasing In Hong Kong Needs Tax Changes: PwC

by Mary Swire,, Hong Kong

19 January 2016

Professional services firm PwC has said the Hong Kong Government's commitment to turn Hong Kong into an Asian aviation leasing hub will require a more competitive tax regime.

In this month's 2016 Policy Address, Chief Executive Leung Chun-ying confirmed that "the Government is formulating measures to develop Hong Kong into a center for aerospace financing," as part of its policy to "further strengthen Hong Kong's edge as a major regional aviation hub."

PwC called Hong Kong's commitment "welcome news for the aircraft leasing industry, which has been looking for an Asian hub due to the growth in the airline industry in the region."

Catherine Tsang, Tax Partner, PwC Hong Kong, pointed to projections that the Asia Pacific region will require more than 14,000 new aircraft over the next 20 years, worth about USD2.2 trillion. She also noted that "leasing has become an important financing tool for the airline industry. The Hong Kong Government should act fast and bring in the necessary changes to develop this industry as soon as possible."

"If a more competitive taxation regime is approved," Tsang added, "Hong Kong could become a viable base for aircraft leasing serving China and other markets worldwide. The main obstacle for a Hong Kong-based company leasing out an aircraft is that it is taxed on gross rental income rather than profits."

"It is important for the Government to understand the advantageous tax regimes for the industry in the traditional hubs of Ireland and Singapore so as to ensure that any proposed tax changes are competitive," she concluded. "For example, lessors in those jurisdictions can not only claim for tax depreciation, but are also taxed at a more favorable rate."

TAGS: Asia Pacific | tax | tax incentives | aviation | financial services | corporation tax | China | Hong Kong | services | Tax

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