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HK should further enhance tax exemption regime to boost private equity fund sector

HK should further enhance tax exemption regime to boost private equity fund sector

HONG KONG: There is room for further enhancement of the tax exemption regime in Hong Kong, in order to boost the private equity fund business, an official from Hong Kong’s Financial Services Development Council (FSDC) said here on Monday. Florence Yip, the Convenor of FSDC New Business Committee, told a press meeting that Hong Kong has taken positive steps over the last few years to provide a business-friendly tax regime for the private equity and venture capital funds industry. In the face of the keen competition among jurisdictions to be the leading international asset management center in the region, Hong Kong should uphold its prevailing competitive edge in the industry, she said. The FSDC recently released a report entitled “Proposals to Extend Offshore Private Equity Fund Tax Exemption to Hong Kong Businesses.” The report analyses the limitations of the current offshore private equity fund tax exemption regime and proposes a number of refinements.

The refinements include extending the tax exemption to cover investment in Hong Kong private companies and non-Hong Kong private companies with substantial operations in Hong Kong, subject to certain exception; expanding the scope of allowable activities of a special purpose vehicle which can be tax exempted. Established by the Hong Kong Special Administrative Region government in 2013, the FSDC is a high-level cross-sectoral advisory body to promote further development of Hong Kong’s financial services industry and to map out the strategic direction for development.