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Hong Kong to examine tax concessions to attract global funds, Financial Secretary says

by September 24, 2017 General

The government will examine the existing tax concessions applicable to the fund industry to make Hong Kong into a diversified and competitive international fund management centre against its global counterparts, said the city’s financial chief.

The development of asset management and wealth management industries in Hong Kong is in a leading position in the Asian region, Financial Secretary Paul Chan Mo-po wrote in his blog on Sunday.

“We must ensure that Hong Kong’s tax arrangements can compete with other asset management centres,” said Chan, noting that Britain and Singapore have implemented a number of tax incentives to attract fund management companies.

“If Hong Kong is not perfect for tax arrangements, even if the legal framework of Hong Kong can accept different fund products, it will only be futile,” he said.

Once the fund managers chose a jurisdiction to undertake fund management activities, it is difficult for them to shift their business to Hong Kong in the short term, he said.

The comprehensive review will include the feasibility of introducing limited partnership for private equity funds.

The remarks came soon after the Financial Services Development Council urged the government to review the tax concessions arrangement, to make it more business-friendly to the private equity and venture capital funds industry. The council, a government-appointed advisory body, urged the government to extend the tax concessions to private equity funds’ investments in private companies, saying that it would encourage investments and business especially for the city’s “home grown” local companies and start-ups.

As of the first half of this year, a total of more than 2,200 funds were authorised by the Securities Futures Commission, an increase of 12 per cent compared with three years ago, while the number of funds registered in Hong Kong increased by about 50 per cent to 745. These figures reflect the development potential of the fund industry in Hong Kong.

Chan said the requirements for international tax cooperation have been increasing, with particular emphasis on enhancing tax transparency and combating cross-border tax evasion.

The city will ensure the tax concessions will not be considered by other economies as damaging measures, he said.