Inland Revenue (Amendment) (No. 4) Bill 2017 gazetted
A government spokesman said, "The Bill seeks to create a level playing field for all kinds of OFCs by allowing onshore privately offered ones, like the offshore ones, to enjoy profits tax exemption. We hope that the Bill would be conducive to enhancing Hong Kong's competitiveness in respect of the domiciliation of privately offered funds in the form of an OFC, thereby generating demand for services along the whole fund service chain. This would help strengthen Hong Kong's position as an international asset management centre and foster the further development of our financial services industry as a whole."
The spokesperson added, "As this is the first time that Hong Kong is granting tax exemption to onshore funds which are privately offered, we have borne in mind the need to prevent tax abuse and have put in place a series of anti-avoidance measures. The exemption conditions are to ensure that the OFC is non-closely held and that the transactions must be carried out through or arranged by a qualified person in permissible asset classes. The proposal balances the aim of strengthening our asset management industry on the one end and the need to prevent tax avoidance on the other.
"Meanwhile, certain flexibility, in the form of a 10 per cent de minimis limit for investing in non-permissible asset classes and a gear-up period to meet the non-closely held condition, will be allowed. There are also safe harbour arrangements to cater for the actual operational circumstances that an OFC may encounter."
The legal framework for the OFC structure was enacted by the Legislative Council (LegCo) in June last year by way of the Securities and Futures (Amendment) Ordinance 2016. It is a key initiative to help diversify Hong Kong's fund domiciliation platform and build up fund manufacturing capabilities. An OFC is a collective investment scheme with variable capital set up in the form of a company, but with the flexibility to create and cancel shares for investors' subscription and redemption in the funds, which is currently not enjoyed by conventional companies. Also, OFCs will not be bound by restrictions on distribution out of capital applicable to conventional companies, and instead may distribute out of capital subject to solvency and disclosure requirements. The Bill aims to complement the OFC initiative by providing a more facilitating tax environment for OFCs.
The Bill will be introduced into LegCo on June 28.
Ends/Friday, June 23, 2017
Issued at HKT 11:01
Issued at HKT 11:01