Hong Kong: Subsidy grants to support establishment of open-ended fund companies and REITs

The grant subsidy program is available from 10 May 2021 to 9 May 2024 (subject to a government funding cap for the applicable scheme).

The grant subsidy program is available from 10 May 2021 to 9 May 2024.

The Securities and Futures Commission (SFC) in May 2021 announced the implementation of a grant scheme program as support for the establishment of open-ended fund companies and real estate investment trusts (REITs).

The grant subsidy program is available from 10 May 2021 to 9 May 2024 (subject to a government funding cap for the applicable scheme).

  • The subsidy will offer a rebate of 70% of all professional expenses that are paid to Hong Kong-based service providers, with certain restrictions.
  • The subsidy, however, is subject to a cap of HK$ 1 million per open-ended fund company and HK$ 8 million per REIT in Hong Kong. 

Open-ended fund companies

The subsidy will cover 70% of professional fees accrued by managers establishing companies in, or re-domiciling companies to, Hong Kong and that become registered as an open-ended fund company, subject to a cap of HK$1 million per company.  There is a limit of three open-ended fund companies per investment manager who can claim this benefit.  

The types of fees for which expenditure may be reimbursed under the subsidy include:

  • Legal fees for the preparation of incorporation including any fees incurred in drafting legal documents and offering documents
  • Accounting and tax advisor fees
  • Fees charged by fund administrators, company secretaries, corporate service providers and regulatory consultants relating to the incorporation or redomiciling of the company 
  • Listing agent fees incurred for listed open-ended fund companies

The subsidy will not apply to newly set up sub-funds under an existing open-ended fund company structure. 

REITs

The scheme applies to authorized REITs listed on the Stock Exchange of Hong Kong (SEHK) with a minimum market capitalization of HK$ 1.5 billion at the time of listing.  These REITs can then claim up to 70% of professional fees paid to local Hong Kong service providers, up to a cap of HK$ 8 million per REIT.

The types of expenses that are covered by this subsidy are along similar lines for open-ended fund companies and include:

  • Underwriting commissions
  • Legal fees for the preparation of listing (including any offering documents and work done in relation to have the REIT authorized by the SFC)
  • Accountant and tax advisor fees
  • Fees charged by fund administrators, company secretaries, corporate service providers relating to the incorporation/redomiciling of REITs
  • Valuation reports
  • Expenses for advertising and marketing the listing of the REIT
  • Listing fees for any listing agents required for the listing of the REIT

Process and rules

The scheme will not cover any registration or license fees paid to the SFC, nor will it cover audit fees paid to accounting firms for annual audits.

Applications for the subsidy will be considered on a case-by-case, first-come first-served basis. 

  • For private open-ended fund companies, the application must be filed within three months from the date Registrar of Companies issues the certificate of incorporation or certificate of re-domiciliation. 
  • For REITs, the application must be made within three months of the REIT’s listing date. 

The subsidy is subject to a two-year “claw back” if the open-ended fund company were to move away from Hong Kong or the REIT delist from the SEHK. 
 

For more information contact a KPMG tax professional:

David Ling | +1 609 874 4381 | davidxling@kpmg.com

 

 

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