Hong Kong Investment Incentives and Reduced Tax Rate for Certain Treasury Activities

Hong Kong has released the 2015-16 Budget (Budget) in 2015. The Budget includes but is not limited to a proposal to provide a reduced tax rate for certain treasury activities, tax exemption for private equity funds, expansion of tax deductions for certain intellectual property (IP) and other initiatives.

 

To attract more corporate treasury centers (CTCs) which provide centralized treasury management and transactions services for their group entities, the Government has proposed interest deductions for CTCs. Further, a 50% tax incentive would be provided for specified treasury activities, resulting in an effective rate of 8.25%. The proposal will be effected through amendments to the Inland Revenue Ordinance and the relevant bill will be introduced in the 2015-16 legislative session.

 

A bill will be introduced to the Legislative Council to allow private equity funds to enjoy the profits tax exemption available to offshore funds.

 

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Promote Hong Kong As An Intellectual Property Trading Hub

In order to promote Hong Kong as an intellectual property trading hub, the Budget includes an expansion of tax deductions on capital expenditure incurred on the purchase of patents and industrial knowhow, registered trademarks and designs and copyrights rights to cover other types of IP rights as appropriate. The Budget also proposed that a HK$23m (US$3m) funding for offering IP consultation, manpower training and other services to small and medium enterprises will be initiated in the coming three years in order for Hong Kong to become a premier IP trading hub to provide high value-added IP services in the region.

 

The Budget announced that the feasibility of broadening the tax base in due course with the aim of stabilizing government revenue and creating room for direct tax concessions.