HK to promote monetary authority veteran to head HKMA

Eddie Yue Wai-man, deputy chief executive of the Hong Kong Monetary Authority (HKMA), will become the head of the city’s de facto central bank in October 2019. Hong Kong’s government will promote him in order to ensure continuity and stability in the monetary policy while the local economy of Hong Kong is facing unprecedented headwinds.

Eddie Yue Wai-man is the most senior and longest-serving among the three deputy chief executives of the HKMA. He is to the current head of the HKMA as a selection panel concluded that Yue is the most experienced and suitable candidate.

The appointment is expected to ensure a smooth transition at the HKMA at a time when the city is facing unprecedented challenges, including protests against a suspended but controversial extradition bill.

Yue, 54, is responsible for investing the HK$4.137 trillion (USD 529 billion) Exchange Fund that is defending the local currency against short sellers. His appointment comes after the authority reported that the fund had a record HK$170.8 billion in investment earnings for the first half.

Filed under: Business and Economy, Financial Services, Investment Environment, Investor's news, Monetary Policy

HK agrees AEOI with 6 new jurisdictions

Hong Kong has signed agreements with 6 jurisdictions – Belgium, Canada, Guernsey, Italy, Mexico, and the Netherlands – to automatically exchange financial account information in tax matters.

The new jurisdictions that signed the document join Japan, Korea, and the United Kingdom as “reportable jurisdictions” for AEOI purposes in Hong Kong.

The agreements were signed under the OECD’s latest international tax transparency standard, the Common Reporting Standard, which provides that countries should provide on an annual basis information on foreign account holders with deposits in their territory to their home state authorities.

The Inland Revenue Department expects to begin exchanging information automatically in 2018, providing domestic legislation is put in place this year.

Filed under: Business and Economy, Financial Services, International Business Environment, Taxation

HK and South Korea to Automatically Exchange Tax Data

On January 23, 2017, Hong Kong and South Korea signed a Competent Authority Agreement (CAA) to allow for the automatic exchange of financial account information in tax matters (AEOI) from 2019.

According to a Hong Kong Government spokesperson, since the signing of the first 2 agreements for AEOI with Japan and the United Kingdom in late 2016, Hong Kong has been seeking to expand Hong Kong’s AEOI network with other tax treaty partners. So, the signing of the agreement with South Korea signifies the Government’s efforts in this respect.

Hong Kong’s Government has previously emphasized that it is supportive of the international efforts to enhance tax transparency and combat cross-border tax evasion, and that it would expand Hong Kong’s network of CAAs with partner countries, particularly those with which it has previously completed a double taxation agreement (DTA).

When announcing the signing of the CAA, South Korea’s Ministry of Strategy and Finance stated that, although the two jurisdictions have provided each other with tax information on request since 2016, when the South Korea-Hong Kong DTA entered into force, the CAA “will provide a more effective way to avoid international tax evasion.” So far, South Korea has signed bilateral CAAs with the United States and Singapore. It is to work on further agreements with 45 countries in 2017, and is expected to add 31 countries in 2018 to the list of CAAs in force.

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

HK signs DTA with Belarus

To lower withholding tax rates on cross-border income, Hong Kong and Belarus have agreed to sign a new comprehensive double tax agreement (DTA).

The DTA is part the Government’s efforts to expand Hong Kong’s tax treaty network, to support Mainland China’s Belt and Road initiative, which is intended to promote economic co-operation among countries along its route.

Under the new agreement, double taxation will be avoided. So, any Belarusian tax paid by Hong Kong companies will generally be allowed as a credit against the tax payable in Hong Kong on the same profits. For Belarusian companies, the tax they paid in Hong Kong will also be allowed as a credit against the tax payable on the same income in Belarus.

In addition, Belarus’s withholding tax rate for Hong Kong residents on royalties (currently at 15% for companies and 13% for individuals) will be capped at 5%, and it will be further reduced to 5% if the royalties are for the right to use aircraft.

Belarus’s withholding tax rate for Hong Kong residents on dividends (currently at 12% for companies and 13% for individuals) and interest (currently at 10% for companies and 13% for individuals) will also be capped at 5%.

Hong Kong airlines operating flights to Belarus will be taxed at Hong Kong’s corporation tax rate, and will not be taxed in Belarus; and profits from international shipping transport earned by Hong Kong residents that arise in Belarus, which are currently subject to tax there, will no longer be taxed in Belarus.

The Hong Kong/Belarus comprehensive double tax agreement incorporates an article on the exchange of information, which will enable Hong Kong to enhance the fulfillment of its international obligations on tax transparency.

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

This DTA is the 36th DTA that Hong Kong has signed with its trading partners.

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

Jurisdiction of HK increases company incorporations in 2016

According to Hong Kong’s Companies Registry, there was an increase in local company incorporations in Hong Kong in 2016, although incorporations by foreign companies experienced a dip.

The new figures show that the total number of local companies registered under the Companies Ordinance reached 1,341,223 at the end of 2016, up 52,557 from the corresponding figure at the end of 2015.

In 2016, there was a total of 144,883 newly-registered local companies with the Companies Registry.

In 2016, 874 non-Hong Kong companies established a new place of business in Hong Kong under the Companies Ordinance, which is a slight decrease of 2.24% from 894 in 2015.

The total number of registered non-Hong Kong companies reached 9,983 by the end of 2016, down 0.46% year on year.

Filed under: Financial Services, HK as a Financial Centre, Offshore Companies, Offshore services

HKMA urges banks to ease requirements on startup account openings

On September 8, Hong Kong’s banking regulator urged financial firms to review requirements that have made it virtually impossible for startups and small companies to open bank accounts in Hong Kong.

Opening bank accounts has been one of the key issues holding back the development of financial technology companies in Hong Kong as it competes with Singapore, Australia and China to lure investments in the sector.
The Hong Kong Monetary Authority (HKMA) launched a regulatory regime known as a “sandbox” for innovation in the banking sector, amid fears the city is losing ground to other markets.

The measures are not aimed at helping facilitate the account openings of financial technology companies specifically, but to “make sure banks do not lean against anyone in particular.”

In a circular to banks, the regulator said that combatting money laundering and terrorist financing were important, but banks are advised to “refrain from adopting practices that would result in financial exclusion.”

Some 20 banks out of the more than 150 under the HKMA’s supervision have volunteered to be put on a list welcoming accounts from startups and small-and-medium enterprises (SMEs).

Filed under: Banking Services, Financial Services, HK as a Financial Centre

HK Asset Management sees slight decrease

According to the Securities and Futures Commission (SFC), combined fund management business in Hong Kong decreased slightly by 1.6% year-on-year to almost HKD 17.4 trillion, as at December 31, 2015.

The SFC’s annual Fund Management Activities Survey indicates that Hong Kong remained a preferred platform for international investors. Funds sourced from them accounted for 68.5% of Hong Kong’s fund management business in 2015.

Also, the proportion of assets managed in Hong Kong has increased consistently over the past 3 years, and reached 55.7% of the asset management business. More than 58% of the assets managed in Hong Kong were invested in equities.

“Amid a volatile year in global markets, Hong Kong maintained its position as a leading international fund management center,” said Ashley Alder, SFC’s Chief Executive Officer. He added: “Following the successful implementation of the groundbreaking Mainland-Hong Kong Mutual Recognition of Funds (MRF) scheme, SFC will pursue strategies to further develop Hong Kong as a global, full service asset management center.”

Under the MRF scheme, the sale or purchase in Hong Kong of units of a recognized Mainland fund is not subject to stamp duty in Hong Kong, while the sale or purchase in the Mainland of units of a recognized Hong Kong fund is subject to stamp duty, since the units are required to be registered in Hong Kong.

In addition, in 2015 there was the extension to offshore private equity funds of the profits tax exemption that was already available to private equity funds. This covers their investments in eligible overseas private companies.

Filed under: Business and Economy, Financial Services, Financial statistics, HK as a Financial Centre, Offshore Companies, Offshore services

Mainland Chinese Companies attracted to HK Properties

Famous for the world’s priciest office towers, Hong Kong’s Central district is attracting more mainland Chinese companies to move in. This leads to a rise in rents and prompting some Western firms to search for cheaper digs elsewhere.

Despite China’s stock-market tumult this year, mainland banks and asset managers are crowding into the district in hopes of drumming up new business with foreign clients. This further cements Hong Kong’s status as the prime gateway into and out of China, according to property experts and bank analysts.

To remind, Mainland China firms long have had a presence in the former British colony. Bank of China opened its first Hong Kong office in 1917 and now occupies the I.M. Pei-designed Bank of China Tower. In the early 2000s, the 4 largest state-controlled banks opted to list on the Hong Kong stock exchange and took nearby office space, sometimes whole buildings.

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

HK Heads is Freest Economy in Global Ranking

The Government of Hong Kong has welcomed the Fraser Institute’s ranking of the city as the world’s freest economy, based in part on its commitment to low taxation.

Out of 157 countries and territories, Hong Kong and Singapore again occupy the top two positions. They are followed by New Zealand, Switzerland, UAE, Mauritius, Jordan, Ireland, Canada, and the UK.

Among the major areas of assessment, Hong Kong ranks first in “size of government,” “freedom to trade internationally” and “regulation.”

“The Government attaches great importance to Hong Kong’s economic freedom, and will strive to uphold the tradition of the rule of law and an independent judiciary, a small and efficient public sector, and a free and open business and trade environment, which are the cornerstones of Hong Kong’s economic success,” a spokesman said.

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

China supports Future Autonomy of HK

On June 10, the Government of Chinesa issued a White Paper to confirm the Government’s continued support for Hong Kong’s autonomy to set its own trade, financial and taxation policies, noting the territory’s successes under the One Country, Two Systems policy.

Under the title, “The Practice of the One Country, Two Systems Policy in the Hong Kong Special Administrative Region (HKSAR),” the White Paper, the first of its kind, describes how the implementation of the principle of “one country, two systems” in the HKSAR has achieved widely recognized success and remains in the long-term interests of Hong Kong and of foreign investors.

The paper describes how Hong Kong has maintained and strengthened its status as an international financial, trade, and shipping center. As an important international banking center, “Hong Kong boasts the world’s 6th-largest securities market and 5th-largest foreign exchange market. As the world’s 9th-largest trading economy, Hong Kong has regular trading ties with almost every country and region in the world. It is one of the world’s largest container shipping ports and 4th-largest ship-registration center.”

Hong Kong has maintained a sound business environment, and it is recognized as one of the freest world’s economies. In its World Investment Report 2013, the United Nations Conference on Trade and Development ranked Hong Kong 3rd in the world in attracting foreign direct investment (FDI), and, for many years, Hong Kong has been listed among the world’s most competitive economies.

By the end of 2013, the number of Mainland enterprises listed in Hong Kong totaled almost 800, accounting for 48.5% of the total number of Hong Kong-listed companies. In addition, their total market value accounted for 56.9% of the total value of the Hong Kong stock market. The Mainland and Hong Kong are each other’s largest source of overseas direct investment.

For its part, the Hong Kong Government welcomed the promulgation of the White Paper – the first to be issued by China on Hong Kong’s position. It confirmed that “Hong Kong has benefited from the unique advantages of One Country, Two Systems and attained remarkable achievements in economic and social development.”

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