New professional investor rules introduced in Hong Kong

Having concluded a consultation launched in October 2010, Hong Kong’s Securities and Futures Commission (SFC) has announced its plans to proceed with proposals to refine the requirements for evidencing whether a person qualifies as a high-net-worth professional investor.

The proposals aim to create more flexibility by means of adopting a principles-based approach.

In order to qualify as a professional investor under the Professional Investor Rules (PIR), it would not be desirable to seek to prescribe all the possible ways that an investor could demonstrate that they have the relevant assets. The SFC will rely on the firms’ professional judgement when deciding the methods to satisfy themselves that their clients have the required assets or portfolio levels at the relevant date. Firms are expected to keep proper records of their assessment process so that they could demonstrate having exercised professional judgement and having reached a reasonable conclusion.

Filed under: Investment Environment, Investor's news

DTA between Hong Kong and Hungary comes into effect

On February 23, 2011, the double tax agreement (DTA) between Hong Kong and Hungary came into effect, which followed the completion by both countries of their respective approval procedures. This DTA was formally signed on May 12, 2010.
The DTA between Hong Kong and Hungary sets out the allocation of taxing rights between the two jurisdictions as well as the relief on tax rates on different types of passive income. The document also incorporates the internationally-agreed Organisation for Economic Co-operation and Development (OECD) standard on the exchange of tax information.

Under the agreement, companies in Hungary that were previously, in the absence of the DTA, subject to a 25% Hungarian withholding tax, will have withholding tax rates reduced to 10%. Also, the withholding tax rate will be further reduced to 5%, if the recipient is a company holding 10% or more of the share capital of the paying company. Now Hong Kong residents who receive royalties from Hungary are subject to a current withholding tax of 30% in Hungary, while, under the double tax agreement, the withholding tax on royalties will be capped at 5%. The Hungarian withholding tax on interest paid to Hong Kong residents will also be reduced from the current rate of 30%, to 5%.

Beginning on or after April 1, 2012, the DTA will come into force in Hong Kong for any year of assessment.

Filed under: HK Law changes, Taxation

HK to legislate on price sensitive info

Hong Kong’s Secretary for Financial Services and the Treasury, Professor Chan, has confirmed that the government of Hong Kong is about to press ahead with the statutory codification of certain requirements aimed to disclose price sensitive information (PSI) by corporations listed in the jurisdiction.

When announcing concluding a consultation on legislative proposals for PSI, Chan said: “The objective of the legislative exercise is to cultivate a continuous disclosure culture among listed corporations. We believe that a statutory regime is necessary to enhance market transparency and quality. It helps sustain Hong Kong’s position as a premier capital formation centre in the region.”

Under the proposed regulation, PSI must be disclosed by a listed corporation to the public as soon as reasonably practicable after the PSI has come to its knowledge. The Hong Kong’s Securities and Futures Commission (SFC) would serve as the enforcement authority. The Market Misconduct Tribunal (MMT) would determine if there has occured a breach of the PSI disclosure requirement.

The government of Hong Kong is planning to introduce the bill into the Legislative Council with a view to amend the Securities and Futures Ordinance in the 2010/2011 legislative year.

Filed under: HK Law changes, Offshore Legislation

One-Stop Company Registration introduced in Hong Kong

A new regime of one-stop company and business registration, together with a one-stop notification of change of company particulars, will be jointly launched by Hong Kong’s Companies Registry and the Inland Revenue Department (IRD). One-stop company incorporation in Hong Kong will be effective from February 21, 2011,

Under the new regime, the Companies Registry will process the simultaneous business registration applications and notify IRD of changes of the relevant company particulars.

Anyone who submits either a local company incorporation form or an application form for registration of a non-Hong Kong company will make a business registration application at the same time. Under this new registration rules, companies will be required to lodge one single application for both company and business registration.

The new registration regime regards both paper and electronic applications. Once the application is approved, the Hong Kong’s Companies Registry issues a Certificate of Incorporation together with a Business Registration Certificate to the applicant.

Filed under: Business and Economy, Offshore Companies, Offshore services

Budgetary Tax Incentives proposed by HKICPA

The Hong Kong Institute of Certified Public Accountants (HKICPA) has released its proposals for Hong Kong’s 2011/2012 Budget. The proposals focused on particular adjustments to the tax system and on broadening the tax base.

The HKICPA has not proposed any specific, one-off tax relieves. It suggested that it is necessary to address ageing population and community needs in Hong Kong.

According to the HKICPA. the Hong Kong’s government could allow deductions for voluntary contributions of individual taxpayers to their mandatory provident fund schemes, subject to an annual cap of HK$ 48 000 (USD 6 160), in addition to their mandatory contributions of up to HK$ 12 000. The government could also allow deductions for private medical insurance, subject to an annual cap of HK$ 12 000 per taxpayer, as well as provide for a 20% increase in annual allowances for dependent relatives, the disabled and children.

The HKICPA thinks that the Hong Kong’s government should go on exploring options to broaden the tax base. It says “the narrowness and volatility of Hong Kong’s tax base, and the limited number of persons, legal and natural, providing the bulk of profits and salaries tax revenue will remain a concern and a risk, given the challenges faced by Hong Kong, including increasing competition from other markets, an ageing population, increasing healthcare costs, the need to improve the environment and to adopt policies that have regard to longer-term sustainability.”

Filed under: HK as a Financial Centre, Taxation