HK to begin FTA negotiations with Chile

It has been announced that Hong Kong and Chile have agreed to start negotiations on a comprehensive bilateral free trade agreement (FTA). The negotiations should start early in 2012.

A spokesman of the government of Hong Kong said that an FTA between Hong Kong and Chile will be instrumental in enhancing a closer economic relationship between the two jurisdictions. To tap business opportunities and potential in this emerging market, and also the opportunities Chile provides as a gateway to the South American region, Hong Kong is interested to negotiate this FTA.

The FTA negotiations between Hong Kong and Chile are to cover the following:
– the liberalization of trade in services;
– the promotion and protection of investment;
– the removal or reduction of tariffs;
– the liberalization of non-tariff barriers, including technical barriers to trade, sanitary and phytosanitary measures, anti-dumping, safeguards and countervailing measures;
– rules of origin;
– customs facilitation procedures.

Trade in goods between the two jurisdictions totalled over HKD 6 billion (USD 778 million) in 2010, which is an average annual growth rate of 7.5% when compared with 2004. As to bilateral trade in services between Hong Kong and Chile, it amounted to only HKD 573 million in 2009, but this still was an average annual growth rate of 7.6% when compared with 2003.

Filed under: Business and Economy, Financial statistics, HK as a Financial Centre, International Business Environment, Investment Environment

HK discusses Tax Support for SMEs

To reply to a question in the Legislative Council, Hong Kong’s Secretary for Commerce and Economic Development, Gregory So, confirmed that the government of Hong Kong would consider whether further measures were required to help small and medium-sized enterprises (SMEs) to overcome the challenges faced in the current economic environment. This will be done when formulating the 2012-2013 Budget.

Many SMEs face problems, such as decreases in orders, high costs, difficulties in financing, and arrears from clients in payments for goods, so, it is suggested that the government could consider allowing more SMEs to defer prepayment of profits tax and offering concessionary tax rates to SMEs with turnover or profits below a particular threshold.

So indicated that the principle of “earning more, paying more; earning less, paying less” is already included in the existing single profits tax rate. He noted that, in 2009-2010, only about 83 000 corporations, accounting for 12% of registered corporations, paid profits tax, so, the majority of SMEs either do not have to pay tax or pay a very small amount of it.

If individual taxpayers cannot pay tax on time due to financial difficulties, they may apply to the IRD in order to pay tax by installments. The existing well-established arrangements can help those SMEs, whose profits are expected to decline due to adverse economic circumstances, to arrange tax payment in a more flexible manner.

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

HK and China sign CEPA Supplement VIII

The governments of Hong Kong and China have agreed to strengthen their economic and trade co-operation by signing the 8th Supplement under their bilateral Closer Economic Partnership Arrangement (CEPA).

The CEPA provides Hong Kong enterprises with an opportunity to enter Mainland markets. The document covers more than 1 600 products and 40 services sectors, and adopts a building block approach. The two jurisdictions have been working closely to introduce further liberalization measures.

The Supplement VIII to the CEPA was signed on December 13. It was witnessed by Hong Kong’s Chief Executive Donald Tsang, and signed by Financial Secretary John Tsang and China’s Vice-Minister of Commerce Jiang Yaoping.

It should be noted that the new Supplement further opens Chinese service-sector market to Hong Kong and strengthens bilateral trade.

Also, the supplement allows Chinese banks to make use of Hong Kong’s international financial platform with a view to develop their international businesses. In addition, it supports Hong Kong insurance companies entering the market through the setting up establishments or taking capital participations, to participate and share in the development of the Mainland insurance market.

Filed under: Business and Economy, HK as a Financial Centre, Hong Kong and China

World Economic Forum rates HK as Leading Financial Centre

It has been recently disclosed by the World Economic Forum (WEF) that Hong Kong has overtaken the US and the UK to top its 2011 4th annual Financial Development Report.

The WEF carries out a study of 60 leading financial systems and capital markets, investigating the drivers of financial system development that support economic growth. The 7 pillars that are assessed are as follows: institutional environment, business environment, financial stability, banking financial services, non-banking financial services, financial markets and financial access.

As the 1st Asian financial centre to achieve this rank with a score of 5.16 out of 7, Hong Kong’s position was bolstered by strong scores in non-banking financial services, such as initial public offerings (IPOs) and insurance. It is worth noting that Hong Kong was ranked 4th in 2010.

Hong Kong’s Financial Secretary, John C Tsang said: “We will continue to strengthen Hong Kong on various aspects as a leading financial centre and as the Mainland’s offshore renminbi centre,” he added.

Filed under: Banking Services, Business and Economy, Financial Services, HK as a Financial Centre, International Business Environment, Offshore services

HK to take measures on speculative property controls

Hon Kong’s Financial Secretary John Tsang said that the jurisdiction may revoke property-cooling measures introduced in 2010 if home prices extend their slide.

Tsang noted that prices of residential property in Hong Kong were slowly coming down, and the trend is expected to continue for while. He added that he hopes the market would avoid a hard landing. In accordance with the report, house prices in the city eased to a 6-month low in November, while Centaline Property research showed residential rental rates fell in October for the 1st time in 30 months. In November 2011, Barclays Capital forecast that Hong Kong residential prices would drop 25% to 30% from their peak levels under a soft-landing scenario and could fall as much as 35% to 45% under a deflationary environment of rising joblessness, falling income and weak confidence.

Filed under: Business and Economy, Financial statistics

DTA between HK and France enters into force

On October 21, 2010, Hong Kong and France signed the double taxation agreement. On behalf of Hong Kong’s government, the document was signed by Hong Kong’s Financial Secretary, John C Tsang, and on behalf of French government, it was signed by the French Minister of Economy, Industry and Employment, Christine Lagarde. On December 1, 2011, the recently-signed tax treaty came into effect.

At the signing ceremony, Tsang noted that the double taxation agreement is elevating the bilateral relationship between Hong Kong and France to a new level. He expressed his confident that the document will represent a win-win for all parties because Hong Kong goes on riding on the dynamic growth in the Asian region and offering great opportunities to French companies seeking to expand their presence in the financial centre of Hong Kong.

He added: “The French business community in Hong Kong is one of the largest in the Asia Pacific, and French companies are doing well in all major sectors of our economy including banking, finance, transport, media, construction, catering and tourism.”

Prior the signing of the DTA, profits earned by French residents in the jurisdiction were subject to both Hong Kong and French income tax. Profits of French companies doing business through a branch in Hong Kong were fully taxed in both jurisdictions. Due to the agreement, double tax will be avoided – the income taxed in Hong Kong is allowed as a tax credit against French tax attributable to such income.

It should be noted that the DTA between Hong Kong and France incorporates the latest OECD standard on the exchange of information for tax purposes.

The DTA will have effect in Hong Kong for any year of assessment beginning on or after April 1, 2012.

Filed under: Business and Economy, International Business Environment, Offshore Legislation, Taxation