Trade Deficit in HK widens in March

According to the data released by the Census and Statistics Department on April 27, Hong Kong’s merchandise trade deficit widened in March.

The visible trade deficit increased to HK$ 40.1 billion from HK$ 25.1 in February, while a shortfall of HK$ 36.6 billion had been expected by economists. To compare, in the same month in 2010, the deficit was HK$ 38.9 billion.

Exports growth pace decreased slowed in March. Year-on-year, shipments rose 21.5% as compared to 24.9% increase in February, while economists had expected a 20.4% growth. Exports grew 23.5% as compared to February 2011.

As regards imports, they increased 18.8% annually, following a 25.2% growth in February, while economists had forecast an 18.4% rise. Arrivals increased 27.1% on a monthly basis.

According to the statistical office, in March, the Asian markets remained strong. Exports to the United States and European Union recorded double-digit growth in value terms over a year earlier.

A Hong Kong government spokesman said that the vibrant performance of the Asian economies and the sustained recovery in the United States and European Union should continue to render support for Hong Kong’s export performance. However, the various uncertainties in the external environment are still challenging.

Filed under: Financial statistics, HK as a Financial Centre

HK SFC to regulate Credit Rating Agencies from June 1, 2011

The Hong Kong’s Securities and Futures Commission (SFC) will license and regulate credit rating agencies (CRAs) and their rating analysts from June 1, 2011. On June 1, amendments to the Securities and Futures Ordinance (SFO) will come into effect.

The creation of a regulatory regime for CRAs is a result of a public consultation exercise conducted by the SFC in the 2nd half of 2010.

Both CRAs and their rating analysts intending to provide credit rating services on or after 1 June 2011 may start to submit applications to the SFC for a Type 10 licence. To assist the industry in making the transition, the SFC has issued a circular highlighting certain licensing requirements that include the timetable for the submission of licence applications, competence requirements for rating analyst applicants, and criteria for exemption from regulatory examinations for existing rating analysts.

The SFC’s Chief Executive Officer, Mr Martin Wheatley, noted that the licensing and regulation of CRAs in the jurisdiction is in the public interest. He said that these will bring the regulatory regime in line with international developments in this area. Wheatley added that credit rating agencies are encourages to talk to SFC to ask for further clarification of licensing requirements and the manner they are implemented.

Filed under: Business and Economy, Financial Services

Tax cuts gazetted in HK

The government of Hong Kong has gazetted the Inland Revenue (Amendment) (No. 3) Bill 2011, which will implement the concessionary revenue measures that were announced in the 2011-12 Budget. On May 4, the Bill will be introduced to the Legislative Council.

According to the proposed bill, in 2011-2012, the child allowances, the dependent parent/grandparent allowances and the deduction ceiling for elderly residential care expenses for salaries tax and tax under personal assessment will be increased by 20%. Salaries tax and tax under personal assessment will be reduced for 2010-2011 by 75%, subject to a ceiling of HKD 6,000 (USD 772) per taxpayer.

In accordance with the Hong Kong government’s estimations, the above proposed increases in allowances/deduction will altogether cost the government about HKD 1.22 billion per year.

The one-off reduction in salaries tax and tax under personal assessment for 2010-2011 was proposed by the Financial Secretary given the better than expected fiscal position and to share wealth with taxpayers. The proposed reduction will be beneficial to about 1.5 million taxpayers, while the estimated revenue cost to the government will be around HKD 5.33 billion.

The government has also confirmed that, with regard to the payment of HKD 6,000 each to all Hong Kong permanent identity card holders aged at least 18, it is working out the details of the proposal.

When the details of the proposal are finalized, it will be presented to the relevant panel of the Legislative Council, and then funding approval will be sought from the Finance Committee. Once funding approval is obtained, the government will immediately take forward the proposal in order to start registration to receive the payment as soon as possible.

Filed under: Taxation

Russia looks for increased cooperation with Hong Kong

On April 16, the Russian President Dmitry Medvedev paid a visit to Hong Kong. He arrived in Hong Kong on the first visit by a Kremlin chief to this offshore jurisdiction, seeking to harness its financial expertise in modernising Russia and to diversify his country’s economy beyond oil and gas. The President of Russia met with Hong Kong chief executive Donald Tsang and visited the stock exchange.

During the visit, Tsang stated that the 2 countries have enormous potential for stronger links. He pointed out that there has already been the first listing of a Russian company on the Hong Kong stock exchange. Actually, 2 Russian companies have so far listed in Hong Kong – UC Rusal and IRC, and it should be noted that further Russian companies are expected to get listed in Hong Kong soon.

Tsang confirmed that Russian businesses can use Hong Kong “as a stable and efficient platform to settle their Mainland trade using RMB” as Hong Kong’s banks can offer a full range of renminbi (RMB) services. He noted that VTB Bank achieved a successful RMB bond issue in 2010, which was the 1st by a Russian company.

Tsang said that another way for Russian companies to expand their reach in the Mainland is through Hong Kong’s unique free trade arrangement. Russian companies are welcomed to explore the ways they can benefit from the Mainland-Hong Kong Closer Economic Partnership Arrangement, whereby Russian companies incorporated in Hong Kong could enjoy enhanced access to Mainland markets.

With the ever-closer ties between Hong Kong and Russia by way of investment and trade, Hong Kong would like to add a DTA (double taxation agreement) with Russia to the expanding list of such agreements it has with jurisdictions worldwide.

Filed under: Business and Economy, International Business Environment, News and politics, Taxation

HK and Spain sign Double Tax Treaty

On April 1, the 20th comprehensive agreement for the avoidance of double taxation (DTA) was signed by Hong Kong and Spain. This was the document concluded in Hong Kong and signed on behalf of the jurisdiction by the Chief Secretary for Administration, Henry Tang. On behalf of Spain it was signed by the Spanish Second Vice-President, Elena Salgado.

According to Tang, the double tax agreement sets out clearly the allocation of taxing rights between the two parties and the relief on tax rates on different types of passive income.

The document is to help investors better assess their potential tax liabilities from cross-border economic activities. Tang said: “The agreement will boost closer economic and trade ties between the two places, and provide added incentives for companies in Spain to do business or invest in Hong Kong, and vice versa”.

The DTA will incorporate the latest OECD standard on tax information exchange.

The agreement will come into force following the ratification procedures completion on both sides.

Filed under: International Business Environment, Taxation

Liechtenstein corrects Hong Kong-Liechtenstein DTA release

The government of Liechtenstein has announced a correction to its release published on March 16, 2011. The release regarded the bilateral double tax agreement (DTA) in place between Hong Kong and Liechtenstein.

According to the Liechtenstein government, although the agreement was ratified by Liechtenstein on March 16, ratification of the treaty by Hong Kong is still pending.

The recent announcement emphasizes that the DTA has not entered into force yet. The date of entry into force will be published following notification from Hong Kong.

Hong Kong’s ratification of the DTA is expected in the next few months. The treaty will presumably apply from the 2012 tax year.

Filed under: International Business Environment, Taxation