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Hong Kong Provides Tax Concessions For Carried Interest

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

03 March 2021


The Hong Kong Government has published in its Official Gazette legislation to provide tax concessions for carried interest distributed by eligible private equity funds operating in Hong Kong.

The Government said that, broadly speaking, carried interest refers to a return linked to the performance of an investment of a private investment fund, typically upon the disposal of the investment after it has been held for a period of time.

Under the proposed legislation, eligible carried interest would be charged at a profits tax rate of zero percent. One hundred percent of eligible carried interest would be excluded from employment income for the calculation of salaries tax.

The Government also intends to expand the classes of asset that may be held and administered by a special purpose entity on behalf of a fund for the purpose of a profits tax exemption regime for funds.

A spokesperson for the Financial Services and the Treasury Bureau said: "Qualifying carried interest recipients have to provide investment management services in Hong Kong and fulfil substantial activities requirements. For tax concessions to apply, carried interest must arise from eligible transactions in private companies and be distributed by a fund certified by the Hong Kong Monetary Authority or the Innovation and Technology Venture Fund Corporation set up by the Government."

TAGS: tax | investment | business | private equity | tax incentives | interest | corporation tax | legislation | Hong Kong | tax breaks | tax reform | services

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