Hong Kong’s Financial Secretary delivered his budget speech on 26 February 2020. The budget includes several actions to enhance Hong Kong as an international financial centre. The section of the speech dedicated to the financial services industry is available here.
1. Tax concession for carried interest paid by private equity funds operating in Hong Kong: The government has been focused on enhancing Hong Kong as an international asset and wealth management centre. It is working on the establishment of a limited partnership regime to encourage the establishment of private equity funds in Hong Kong. As part of this work, the Financial Secretary announced that “With a view to attracting more private equity funds to domicile and operate in Hong Kong, we plan to provide tax concession for carried interest issued by private equity funds operating in Hong Kong subject to the fulfilment of certain conditions. We will consult the industry on the proposal, and the relevant arrangement will be applicable starting from 2020-21 upon completion of the legislative exercise”.
2. Waiver of stamp duty on stock transfers paid by ETF market makers: In order to strengthen the competitiveness of Hong Kong’s exchange traded fund (ETF) listing platform, the Hong Kong government intends to waive the stamp duty on stock transfers paid by ETF market makers in the course of creating and redeeming ETF units listed in Hong Kong. This waiver should reduce the transaction costs for market makers and encourage greater liquidity for ETFs listed in Hong Kong.
3. Enhancement of AML/CTF regime: Hong Kong is the first jurisdiction in the Asia-Pacific region to have successfully passed the Financial Action Task Force (FATF) assessment on its anti-money laundering and counter-terrorist financing (AML/CTF) regime. Please see our previous article on the FATF review. The government will further enhance the Hong Kong AML/CTF regime having regard to the recommendations of the evaluation report from FATF.
4. More Green Bond, iBond, and Silver Bond offerings: The government is planning to issue more Green Bonds, iBonds and Silver Bonds to help develop the Hong Kong local debt market.
The budget contained a number of measures to stimulate the Hong Kong economy. In particular, the government will pay HK$10,000 to each Hong Kong permanent resident aged 18 or above. This payment will inject approximately HK$71 billion into the Hong Kong economy.
The budget also included a number of initiatives to support Hong Kong businesses generally, including:
(i) Waiver of profits tax 2019/20, capped at $20,000;
(ii) 100% government guaranteed concessionary low-interest loans for corporate enterprises (up to a maximum of HK$2 million);
(iii) Waiver of business registration fees for 2020-21;
(iv) Subsidy of 75% of electricity charges for four months in 2020-21, with a monthly cap of HK$5,000; and
(v) Waiver of 75% of water and sewerage charges, for four months in 2020-21, with a monthly cap of HK$20,000 (water) and HK$12,500 (sewerage).
The full budget speech is available here.
For further information, please contact:
Scott Carnachan, Consultant, Deacons