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Hong Kong Asset Management Sees Slight Fall

by Mary Swire,

28 July 2016

Combined fund management business in Hong Kong decreased slightly by 1.6 percent year-on-year to almost HKD17.4 trillion, as at December 31, 2015, according to the Securities and Futures Commission (SFC).

The SFC's annual Fund Management Activities Survey indicates however that Hong Kong remained a preferred platform for international investors. Funds sourced from them accounted for 68.5 percent of Hong Kong's fund management business last year.

In addition, the proportion of assets managed in Hong Kong has increased consistently over the past three years, and reached 55.7 percent of the asset management business. More than 58 percent of the assets managed in Hong Kong were invested in equities.

"Amid a volatile year in global markets, Hong Kong maintained its position as a leading international fund management center," said Ashley Alder, SFC's Chief Executive Officer. "Following the successful implementation of the groundbreaking Mainland-Hong Kong Mutual Recognition of Funds (MRF) scheme, SFC will pursue strategies to further develop Hong Kong as a global, full service asset management center."

Under the MRF scheme, the sale or purchase in Hong Kong of units of a recognized Mainland fund is not subject to stamp duty in Hong Kong, while the sale or purchase in the Mainland of units of a recognized Hong Kong fund is subject to stamp duty, since the units are required to be registered in Hong Kong.

Following on the implementation of the MRF scheme, SFC is to continue to explore similar cooperation arrangements with other jurisdictions. Other initiatives include introducing a new legal and regulatory framework for open-ended fund companies to attract more funds to domicile in Hong Kong, developing online and alternative fund distribution platforms, and working closely with the industry to broaden the types of fund products.

With regard to other tax incentives to encourage the fund management industry to Hong Kong, the signing of the fourth Protocol to the China-Hong Kong double taxation agreement last year confirmed that gains derived by a Hong Kong resident from the sale and purchase of shares in a Mainland-listed company will be taxable only in Hong Kong (where there is no such tax).

Furthermore, last year also saw the extension to offshore private equity funds of the profits tax exemption that was already available to private equity funds. This covers their investments in eligible overseas private companies.

TAGS: capital gains tax (CGT) | tax | investment | business | private equity | tax incentives | investment funds | equity investment | international financial centres (IFC) | corporation tax | China | offshore | stamp duty | Hong Kong | tax breaks

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