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The Chief Executive in Council has made an Order under the Inland Revenue Ordinance to implement the measure in respect of exemption from profits tax interest income accrued from deposits placed locally.

A government spokesman said today (Friday) that the measure had been one of the special relief measures announced on June 22 by the Chief Executive to address the present economic adjustment.

The order exempts from the payment of profits tax interest income received by all businesses, except financial institutions, which are derived from deposits (including certificates of deposits) placed in Hong Kong with authorised institutions under the Banking Ordinance, regardless of their currency denominations.

"The exemption will apply to the whole of the interest paid on all new deposits or renewals of existing deposits which were made on or after June 22, 1998," the spokesman explained.

"As for deposits which were placed or renewed before June 22, the exemption will apply to the whole of the interest accrued on or after such date," he added.

The spokesman said that the exemption would help ease the current credit crunch.

"We believe that it will encourage corporations to repatriate their offshore deposits to Hong Kong and hence will improve the liquidity and lending appetite of banks in Hong Kong," he added.

The order, to be tabled in the Legislative Council on July 8, was gazetted today.

End/Friday, July 3, 1998

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