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Fund Management Sector A Priority For Hong Kong

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

22 October 2012


Following a recent question in the Legislative Council on the development of Hong Kong as a major fund management centre in Asia, the Secretary for Financial Services and the Treasury, Professor K C Chan, confirmed that it remained one of the government’s top policy priorities, although the government has no plans at present for additional tax breaks for the sector.

The questioner, Kenneth Leung, noted that the government has introduced measures, such as the abolition of estate duty, in an attempt to facilitate fund management business in Hong Kong, but its fund management centre role has recently been challenged by Singapore, that has a more accommodating legal and tax regime to cater not only for fund managers but also for funds which seek to establish and to domicile in Singapore.

In reply, on behalf of the government, Chan reiterated that, “alongside our fundamental strengths as an international financial centre, including a stable currency with free flow of capital, a rich pool of talents, and a low and simple tax regime, we have been exploring various initiatives to further promote asset management business in Hong Kong”.

He also said that, while some in the fund industry have proposed the introduction of a legislative framework facilitating the establishment of investment fund vehicles, including the Open-ended Investment Company (OEIC) and Limited Partnership (LP) in Hong Kong, to attract more funds to domicile in Hong Kong, other market participants have pointed out that the attractiveness of a fund domicile also depends on other factors, and that the availability of more investment fund vehicles may not necessarily bring in more funds.

He confirmed that the government is studying the proposal and is engaging with the fund industry to identify measures best suited for Hong Kong’s market circumstances.

In addition, in response to the question of whether the government has any plan to introduce a profits tax exemption for onshore funds, Chan replied that, while, at present, such an exemption is available for offshore funds and the government is prepared to study proposals to enhance such tax exemptions in the light of market development, it needs to examine carefully the overall interests of Hong Kong.

He pointed out that the government needed “to take into account the relevant factors, including Hong Kong's competitiveness as an asset management centre and implications for government revenue, before we consider any plan to introduce profits tax exemption for those funds”.

A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, 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
TAGS: tax | investment | financial services | investment funds | corporation tax | offshore | Hong Kong | services

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