HK gazettes Budget Measures

The Inland Revenue (Amendment) Bill 2012 has been gazetted in Hong Kong with a view to implement the concessionary revenue measures proposed in the 2012-2013 Budget.

The tax concessions are aimed to support businesses and individuals forced to face global economic uncertainties. They include an across-the-board increase in personal allowances under salaries tax, and a one-off reduction of salaries tax, tax under personal assessment and profits tax for the 2011-2012 year of assessment by 75%, subject to a ceiling of USD 1 550.

There will be an rise in the deduction ceilings for elderly residential care expenses as well as for mandatory contributions to recognised retirement schemes, and an extension of the entitlement years for home loan interest deduction. About 1.5 million taxpayers will benefit from the proposed one-off reduction of salaries tax and tax under personal assessment. The proposed one-off reduction in profits tax will be benefitial for taxpayers liable to profits tax (they are almost 120 000).

On May 9, 2012, the Bill will be introduced into the Legislative Council.

Filed under: HK as a Financial Centre, HK Law changes, Offshore Legislation, Taxation

HK and Malaysia sign DTA

On April 25, 2012, Hong Kong’s Financial Secretary, John C Tsang, and the Malaysian Minister of Finance, Ahmad Husni Hanadzlah, signed a comprehensive double taxation agreement (CDTA) between Hong Kong and Malaysia. The signing ceremony took place in Kuala Lumpur.

The DTA is expected to further strengthen the bilateral relationship, particularly by encouraging the flow of investment between the two jurisdictions.

In the absence of this document, the profits of Hong Kong companies doing business through a permanent establishment, such as a sales outlet, in Malaysia may be taxed in both places if the income is Hong Kong sourced. In accordance with the new DTA, double tax will be avoided, which means that any Malaysian tax paid by the companies will generally be allowed as credit against the tax payable in Hong Kong in respect of the income.

Residents of Hong Kong receiving interest from Malaysia are presently subject to Malaysian withholding tax, which is currently at 15%. Under the DTA, such withholding tax rate will be capped at 10%. The Malaysian withholding tax on royalties, currently at 10%, will be capped at 8%, and the Malaysian withholding tax on fees for technical services, currently at 10%, will be capped at 5%.

In addition, under the comprehensive double taxation agreement, Hong Kong airlines operating flights to Malaysia will be taxed at Hong Kong’s corporation tax rate. Profits from international shipping transport earned by Hong Kong residents that arise in Malaysia will not be taxed in Malaysia.

The DTA has incorporated the latest OECD standard on tax information exchange.

The treaty will come into force after the completion of ratification procedures on both sides.

Filed under: Business and Economy, HK as a Financial Centre, Taxation

HK to halve Import and Export Charges

The Commerce and Economic Development Bureau has proposed halving import and export declaration charges (TDEC). This move aimed at boosting Hong Kong’s external trade by lowering transaction costs and thereby benefiting the import-export sector.

In his Budget Speech on February 1, 2012, the Financial Secretary of Hong Kong announced a package of support measures for the business sector. One of them is reducing TDEC across the board by half to ease the business costs for the import and export trade.

The Import & Export (Registration) (Amendment) Regulation 2012 will be tabled at the Legislative Council on May 9, 2012. It is to be implemented on June 1, and should help companies lodging trade declarations save an average of HK$ 9 000 per year.

Currently, anyone who imports, exports or re-exports any article other than an exempted article is required to lodge with Hong Kong’s Commissioner of Customs and Excise an import or export declaration within 14 days and pay the TDEC.

Filed under: HK as a Financial Centre, International Business Environment, Offshore Legislation

HK’s DTA with Indonesia comes into force

On March 28, 2012, the agreement for the avoidance of double taxation (DTA) into force after the completion of ratification procedures on both sides. This tax treaty was signed between Hong Kong and Indonesia on March 23, 2010.

The DTA will eliminate double taxation instances encountered by Hong Kong and Indonesian investors. It is expected to help foster closer economic and trade links between the two jurisdictions.

The agreement for the avoidance of double taxation also includes the prevailing international Organisation for Economic Co-operation and Development standard on exchange of tax information. The document will have effect in Hong Kong for any year of assessment beginning on or after April 1, 2013.

Filed under: HK as a Financial Centre, International Business Environment, Investment Environment, Taxation

HK’s DTA with Spain comes into force

On April 13, 2012, the agreement for the avoidance of double taxation (DTA) that was signed between Hong Kong and Spain on April 1, 2011, entered into force. It came into force after the completion of ratification procedures on both sides.

The DTA between Hong Kong and Spain sets out clearly the allocation of taxing rights between the two jurisdictions and the relief on tax rates on different types of passive income, and should help investors better assess their potential tax liabilities from cross-border economic activities. The agreement is expected to boost closer economic and trade ties between Hong Kong and Spain.

The government of Hong Kong hopes that this tax treaty will provide added incentives for companies in Spain to do business or invest in Hong Kong.

Also, the double taxation agreement incorporates the latest OECD standard on exchange of tax information, and will be in effect in Hong Kong for any year of assessment beginning on or after April 1, 2013.

Filed under: HK as a Financial Centre, International Business Environment, Investment Environment, Taxation

HK’s DTA with Japan comes into effect

The governments of Hong Kong and Japan have exchanged notes and agreed that the double taxation agreement (DTA) between the two jurisdictions entered into force on April 1, 2012.

On November 9, 2010, the DTA between Hong Kong and Japan was signed to set out the allocation of taxing rights between the two countries and the relief on tax rates on different types of passive income.

It is expected that this double tax treaty will help investors better assess their potential tax liabilities from cross-border economic activities, foster closer economic and trade links between Hong Kong and Japan. Also, the document is to provide added incentives for companies in Japan to do business or invest in Hong Kong, and vice versa.

Under the agreement, double taxation will be avoided in that any Japanese tax paid by the companies will be allowed as a credit against the tax payable in Hong Kong in respect of the income, subject to the provisions of the tax laws of Hong Kong. Also, in accordance with the DTA, Hong Kong residents receiving dividends from Japan not attributable to a permanent establishment in Japan will now be subject to a Japanese withholding tax, not greater than 5% (for a company holding for a period of six months at least 10% of the voting shares of the company paying the dividends), and 10% for other cases, rather than the current 20%. In additions, the residents of Hong Kong receiving royalties from Japan are subject to a current withholding tax at 20% in Japan. Under the DTA, the royalties’ withholding tax will be capped at 5%. The Japanese interest withholding tax on Hong Kong residents will also be reduced from the current rate of 20% to 10%.

Filed under: International Business Environment, Taxation

HK issues 2011-2012 Tax Returns

On April 2, Hong Kong’s Inland Revenue Department (IRD) issued about 170,000 profits tax returns, 120,000 property tax returns and 220,000 employer’s returns for the year of assessment 2011-2012, and about 2.16 million tax returns for individuals will be issued on May 2, 2012.

In this year’s Budget, the Financial Secretary proposed a one-off reduction of 75% of profits tax, salaries tax and tax under personal assessment for 2011-2012, subject to a ceiling of HKD 12,000, which is USD 1,545. Upon enactment of the relevant rules, the IRD will make the tax reduction in tax bills in 2012.

In accordance with tax filing system of Hong Kong, personal assessment may reduce the tax payable by individual taxpayers who have to pay profits tax and/or property tax. It is available to sole proprietors, partners in a business and property owners and may reduce tax owed by aggregating assessable income under salaries tax, profits tax and property tax, and making adjustments for the deductions.

The on-going commitment of the Inland Revenue Department to make the filing process easier by enhancing the e-filing service was emphasized. This year, the department has extended its eTAX Internet filing service to enable employers to file annual employer’s returns online.

Hong Kong’s IRD encourages all taxpayers to use the convenient and easy-to-use services under eTAX. Using this service is simple, and with that any registered taxpayer can log into eTAX with his Taxpayer Identification Number.

Filed under: Financial statistics, HK Law changes, Taxation

HK reviews Insurance Industry Developments

Hong Kong’s Secretary for Financial Services and the Treasury, Professor K C Chan, reviewed recent developments in the insurance industry that played an important part in developing financial services in the jurisdiction.

During his remarks to the Hong Kong Federation of Insurers (HKFI), Chan indicated how insurance business in Hong Kong has blossomed in recent years. The premiums for insurance business (in long-term and general business) tripled from HK$ 64 billion, which is USD 8.24 billion, in 2000 to over HK$ 200 billion in 2010. The average growth rate for that 10-year period stood at an impressive 12% per year.

The Secretary for Financial Services and the Treasury revealed that the government of Hong Kong has welcomed the HKFI’s support in all of its initiatives and, in particular, in the proposal to establish an independent Insurance Authority (IA). This authority will facilitate the development as well as increase the competitiveness of the insurance industry.

He confirmed that the government has already received from the industry, such as those in introducing a cap on the insurance industry levy to fund the proposed Policyholders’ Protection Fund (PPF) and exempting reinsurance contracts from the levy, in addition to ensuring a consistent regulatory approach between intermediary insurance activities of banks and non-banks. Chan said that the establishment of a PPF was “another product of a successful partnership between the government and the insurance industry”. The government hopes to introduce the bill regarding the PPF legislation into the Legislative Council in the 2012-2013 legislative session, and to have the PPF up and running in 2013-2014.

Filed under: Business and Economy

HK Insurance Business grows

Total gross premiums of Hong Kong’s insurance industry rose by 9% in 2011 to HK$ 225.8 billion or USD 29.1 billion. This has been recently announced by the Office of the Commissioner of Insurance.

According to provisional statistics, the gross and net premiums of general insurance grew 10.7% to HK$ 34.7 billion, and 8.5% to HK$ 23.8 billion, respectively, in 2011. Overall underwriting profit also grew by HK$ 400 million to HKD 3 billion.

On direct business, gross and net premiums rose 6.4% to HKD 25.6 billion and 6.3% to HK$ 18.8 billion. Accident and health business also continued to increase, with gross and net premiums at HKD 8.9 billion and HK$ 7.4 billion.

Also, general liability business and motor vehicle business grew – gross and net premiums of the general liability business were HK$ 6.6 billion and HK$ 4.8 billion, while gross and net premiums of motor vehicle business were HK$ 3.2 billion and HK$ 2.6 billion.

Still, taking into account the slowdown in property transactions, the gross and net premiums of pecuniary loss business declined by 21.4% and 37.7% to HK$ 1.3 billion and HK$ 677 million.

Filed under: Business and Economy, Financial statistics

Hong Kong and Malaysia set Cross-Border Investment Platform

It has been recently announced that a pilot platform on cross-border investment and debt-securities settlement will be launched by the Hong Kong Monetary Authority (HKMA), Bank Negara Malaysia (BNM) and Euroclear Bank.

The platform that is scheduled to be set up on March 30 will enhance cross-border debt-securities settlement efficiency, and strengthen the capacity for debt-securities issuance activities in the Asian region. Its launch will strengthen the cross-border issuance of, and foreign investment in, local bonds in Hong Kong and Malaysia. Investors in Hong Kong and Malaysia will be able to buy and hold foreign debt securities and settle cross-border transactions on a delivery-versus-payment (DvP) basis, while local and international bond issuers will be able to issue a wide range of debt securities.

Peter Pang, HKMA’s Deputy Chief Executive said: “We are pleased to see the pilot platform going live. It is a strategic alliance that goes much beyond commercial cooperation and will bring about more significant benefits in fostering global and regional bond market development as well as promoting financial stability in the region. The HKMA will continue to collaborate with BNM and Euroclear Bank to promote the pilot platform to other central banks and securities settlement systems in the region and implement additional services to meet market needs.”

Filed under: International Business Environment, Investment Environment, Investor's news