Hong Kong Passes Trust Tax Bill

Stephen Harris

2 March 2006

Hong Kong's lawmakers have passed a new bill that amends the Inland Revenue Ordinance to exempt offshore funds from profits tax. The exemption, contained in the Revenue (Profits Tax Exemption for Offshore Funds) Bill 2005, is seen as vital for Hong Kong to reinforce its status as an international financial centre and enhance its competitiveness. The jurisdiction’s Secretary for Financial Services & the Treasury Frederick Ma told legislators that: "The proposed exemption will strengthen Hong Kong's competitiveness in attracting new offshore funds and encourage existing funds to continue their investment. "It will lead to an increase in market liquidity and employment opportunities in the financial services and related sectors. Downstream service sectors such as brokers, accountants, bankers, lawyers, will also benefit from the proposal." The entity that owns the fund must be non-resident, whilst not carrying on any business in Hong Kong other than the fund-related qualifying transactions to gain exemption under the proposal. Individuals’, partnerships’, corporations’ and trust estate trustees offshore funds are set to enjoy tax exemption under the new law.