****************************************************

The Legislative Council passed the Revenue (No.3) Bill 2003 today (November 5). The Bill seeks to implement two of the tax concession proposals announced in the 2003-04 Budget, namely enhanced tax concessions for qualifying debt instruments (QDIs), and exemption from fixed stamp duty for unit trusts.

QDIs are certain specified high quality debt instruments. After passage of the Bill, the original 50% profits tax concession for trading profits and interest income derived from QDIs with an original maturity period of not less than five years will be extended to QDIs with a maturity period of not less than three years. For profits and interest income derived from QDIs with a maturity period of not less than seven years, the current 50% profits tax concession will be increased to 100% exemption.

With regard to unit trusts, subscriptions to and redemptions of units in unit trust funds domiciled in Hong Kong will be exempted from the $5 fixed stamp duty.

A spokesman for Financial Services and the Treasury Bureau said "The proposal relating to QDIs will encourage the supply of and trading activities in medium-term and long-term debt instruments and help promote the development of the debt market as a whole. The exemption of subscriptions to and redemptions of unit trusts from the fixed stamp duty will allow local funds to compete with their offshore counterparts on a more equal basis, thereby attracting funds to establish in Hong Kong."

"The proposals will promote the development of the financial services industry and enhance Hong Kong's status as an international financial centre. The securities industry has welcomed and indicated support to the proposals," he added.

The tax concession for QDIs is estimated to cost government revenue around $17 million a year, while the financial implications of the exemption for unit trusts will be minimal.

The concession on profits and interest income from QDIs will apply to all issues made on or after Budget Day on March 5, 2003, whereas the exemption on fixed stamp duty will apply to all subscriptions and redemptions of unit trusts domiciled in Hong Kong that take place after commencement of the Bill.

End/Wednesday, November 5, 2003

NNNN