On 10 October 2018, Chief Executive Carrie Lam delivered her second policy address (click here). This sets out the Hong Kong government’s policies over the coming years.
Of interest from a tax perspective is the shift over the past few years towards a more proactive view on tax and the use of tax incentives to enhance Hong Kong’s position as an international finance centre and as a major platform for capital raising and financing.
This year, the maritime industry was identified as a major pillar in supporting the development of Hong Kong’s trade and logistics industries. Given Mainland China’s Belt and Road Initiative and the proposal to develop the Greater Bay Area, it will be important to enhance Hong Kong as a high value-added maritime services centre and an important transshipment hub in the Asia-Pacific region. The key tax measures include:
Other tax measures that were proposed to diversify Hong Kong’s economy include:
The Hong Kong government is also aiming to increase its double tax treaty network to over 50 treaties in the coming years.
We welcome the government’s initiatives in offering various tax incentives to diversify Hong Kong’s economy and remove some of the competitive disadvantages Hong Kong faces in attracting and retaining businesses.
In the context of the ship leasing incentive, currently, most of the shipping income derived from lease rentals is exempt from tax in Hong Kong. As such, we hope that any new tax incentives do not actually go backwards and impose tax on such operations, but rather will complement and expand the current exemption to cover a range of shipping related support services conducted in Hong Kong.
In addition, we also hope that the new limited partnership regime will address the shortcomings of the open-ended fund company regime which has made it practically difficult for funds based in Hong Kong to use.