HK-Shanghai to enhance co-operation

The Hong Kong-Shanghai Stock Connect had connected the two stock markets. According to Secretary for Financial Services & the Treasury Prof KC Chan said at the fifth Working Meeting of Hong Kong-Shanghai Financial Co-operation in Shanghai, this move turned a new chapter in the mutual access between the two jurisdictions.

Both sides will review Stock Connect’s operation and transactions, and consolidate market feedback in order to enhance the scheme. Prof Chan and Shanghai Municipal Government Financial Services Office Director-General Zheng Yang gave accounts of the latest financial developments in Hong Kong and Shanghai, and representatives of the two territories discussed ways to enhance co-operation in cross-border renminbi business, securities, futures and insurance industries, as well as initiatives to strengthen the training and exchange of financial talent.

Both sides also explored ways to enhance co-operation between the China (Shanghai) Pilot Free Trade Zone and Hong Kong in cross-border renminbi business with a view to facilitate the circulation and use of renminbi between Hong Kong and Shanghai.

Both sides agreed to encourage Shanghai’s financial institutions to conduct investment and financing activities via the Hong Kong platform, and to seek to allow more Hong Kong securities companies to carry out business in Shanghai. Also, both territories will reinforce co-operation in cross-border reinsurance business, as well as continue to organise cross-border study tours for talented post-secondary financial graduates to encourage talent exchange and collaboration.

Filed under: Business and Economy, HK as a Financial Centre, Hong Kong and China, Investment Environment, Investor's news

HK Gazettes Offshore Private Equity Tax Exemption

The Government of Hong Kong has published in its Official Gazette the Inland Revenue (Amendment) Bill 2015, which would extend the profits tax exemption for offshore funds to private equity funds.

The Bill is to be tabled in the Legislative Council on March 25, 2015.

To reinforce Hong Kong’s aim of becoming a venture capital and private equity hub in Asia, the legislative document will provide a tax exemption for offshore private equity funds in respect of profits gained through the disposal of portfolio companies incorporated outside the jurisdiction.

The Secretary for Financial Services and the Treasury, K C Chan, noted that the Bill “will help attract more private equity fund managers to set up or expand their business in Hong Kong and hire local asset management, investment, and advisory services, which will be conducive to the further development of our asset management industry.” He added that this will stimulate demand for other relevant professional services, such as business consulting, tax, accounting, and legal services.

The jurisdictionš private equity industry is growing, with the total capital managed by Hong Kong’s private equity funds reaching USD 114.6 billion at the end of last year, which is a 16% year-on-year increase. This represents 21% of Asia’s total capital managed by private equity funds.

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

Hong Kong is World’ s Freest Economy for 21st year

According to the 2015 Index of Economic Freedom, Hong Kong has maintained its position as the world’s freest economy for the 21st consecutive year.

A Government spokesman said: “We are committed to the free market principles which are the foundation of Hong Kong’s sustained economic stability, growth, and prosperity. We are pleased to see that our efforts to maintain Hong Kong’s economic freedom have been reaffirmed internationally for 21 years in a row.”

Hong Kong retained top position in business freedom, trade freedom, and financial freedom. Also, the jurisdiction received the second-top score in investment freedom. Its scores for fiscal freedom and labor freedom have slightly improved this year.

The Heritage Foundation highlighted Hong Kong’s efficient and transparent regulatory framework, low and simple tax regime, sophisticated capital markets, and its status as the most convenient platform for international companies doing business on the Mainland.

In 2015, Hong Kong achieved an overall score of 89.6 (on a scale from 0 to 100), a decline of 0.5 points compared with last year. This score was significantly above the global average of 60.4. Singapore ranked second with 89.4). Hong Kong and Singapore are followed by New Zealand, Australia, Switzerland, Canada, Chile, Estonia, Ireland and Mauritius.

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

HK First to Ratify WTO’s TFA

Hong Kong has become the first World Trade Organization (WTO) member to formally ratify the organization’s new Trade Facilitation Agreement (TFA).

According to Hong Kong’s officials, on December 10 the WTO’s General Council was informed that Hong Kong deposited its instrument of acceptance for the TFA Protocol with the WTO Secretariat on December 8.

“A multilateral TFA, which can significantly enhance trade flows, is very important to Hong Kong, China, and I believe it is no less so for other economies,” Hong Kong’s Permanent Representative Irene Young told the General Council.

WTO Director-General Roberto Azevêdo congratulated Hong Kong for moving so quickly on ratification and expressed his expectations that other members will gain inspiration from this and will follow Hong Kong.

WTO members concluded the TFA at their December 2013 ministerial conference in Bali, Indonesia. The Protocol of Amendment inserting the TFA into Annex 1A of the WTO Agreement was subsequently adopted by the General Council on November 27, 2014. This in turn opened the door for Members to formally ratify the TFA through their domestic legislative procedures.

The TFA will only enter into force once the Protocol has been ratified by two-thirds of the WTO’s Membership.

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

Chile-HK Free Trade Agreement Enters Into Force

In accordance with an announcement made in Chile’s Official Journal, on December 1, 2014, a free trade agreement (FTA) between Chile and Hong Kong entered into force.

The agreement was originally signed on September 7, 2012 to provide both sides with preferential access to their respective markets.

On trade in goods, for goods originating from Hong Kong, Chile will abolish import tariffs on around 88% of its tariff lines, and will phase out the tariffs on an additional 10% of tariff lines over 3 years.

Hong Kong, on the other hand, has committed to offer tariff-free access for all products originating from Chile from the date that the agreement entered into force.

Also, the free trade agreement includes provisions aimed to promote competition, open access to government projects, enhance co-operation in customs procedures, and protect the environment.

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

HK Slowdown Hits Tax Receipts

According to the 2013-2014 Annual Report of the Inland Revenue Department, Hong Kong collected record taxes of HKD 243.5 billion, which is approximately USD 31.4 billion. However, this represented an annual increase of only 0.6% and was largely due to an increase in salaries tax.

In fact, 2013-2014 became 2nd fiscal year in which the annual growth in revenue collections declined sharply, with the increase falling to only 1.6% in 2012-2013, as compared with the 14% increase seen in 2011-2012.

In his introduction to the Report, Commissioner of Inland Revenue Wong Kuen-fai pointed out that there was a slowdown in Hong Kong’s economy in the 2012-2013 year of assessment. As a result, the growth in assessable profits of business enterprises was further narrowed, and total profits tax collections fell by 4% to HKD 120.9 billion.

Similarly, following the introduction of various demand-side tax measures for the property market, the number of property transactions decreased noticeably in 2013-2014, resulting in an overall fall in the stamp duty collections from property transactions of more than three percent to HKD 41.5 billion.

The maximum amount that salaries tax liability may be reduced was lowered in 2012-2013 from HKD 12,000 to HKD 10,000. This, combined with continued growth in wages and earnings, resulted in a 9.7% rise in tax collections to HKD 55.6 billion.

Followed by salaries tax, profits tax still was the largest revenue source. Together, they made up 72.4% of total revenue.

In a review of the tax law amendments made during the year, Wong said that, as an international financial center, Hong Kong “should not deviate from the international standard”.

He added: “On top of striving to enter into more comprehensive double taxation agreements (DTA), we are committed to enhancing tax transparency.”

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

HK stocks fall, others in Asia go up

Hong Kong stocks fell further as pro-democracy protests entered a second week but most other Asian markets rose ahead of reports on U.S. employment and factory orders.

Hong Kong’s Hang Seng index plunged 1.4% to 22,609.36 points and Tokyo’s Nikkei 225 shed 0.2% to 15,632.29. Taiwan’s Taiex added 1.1% to 9,073.38 and Sydney’s S&P ASX 200 added 0.1% to 5,305.10. Singapore and Jakarta also gained. Shanghai and Seoul were closed for holidays.

Stocks fell further despite the chief executive’s offer of talks with protesters who oppose plans to require candidates for the 2017 election for the territory’s leader be approved by a panel dominated by pro-Beijing business leaders. According to the protesters, the communist government is reneging on a promise of “universal suffrage.” Stocks in retailing and tourism have been hardest hit after some shops closed and Beijing suspended group tours from the mainland.

Filed under: Business and Economy, HK as a Financial Centre, Investor's news, News and politics

Survey ranks HK’s Property Tax Administration System as the only “A”

The Council On State Taxation (COST) and the International Property Tax Institute (IPTI) have issued a survey that rates international property tax administration systems for fairness and efficiency.

The survey named “The Best and Worst of International Property Tax Administration: Scorecard on State and International Property Tax Administrative Practices” focuses on 3 areas of property tax administration – transparency, simplicity and consistency, and procedural fairness.

According to the survey, only one jurisdiction (out of 76 reviewed) has an “A” grade: Hong Kong, which achieves an “A-” and is only brought down by a “B” rating on procedural fairness.

The Scorecard, at present, evaluates the 50 US states (plus the District of Columbia and Puerto Rico), and sub-jurisdictions (states) in Australia and (provinces) in Canada, together with the jurisdictions of the United Kingdom, Ireland, New Zealand, South Africa and Hong Kong. COST and IPTI plan to add further jurisdictions in future updates.

Filed under: HK as a Financial Centre, Taxation

HK relaxes Restrictions for REITs

According to the announcement made by the Hong Kong’s Securities and Futures Commission (SFC), the jurisdiction has revised Code on Real Estate Investment Trusts (REITs) and it was gazetted on August 29, 2014, taking immediate effect.

The first REIT was listed in 2005. Since then, Hong Kong’s REIT portfolios have been widened to offer investors a diverse choice, from retail properties to commercial and hotel properties, and to properties in Mainland China.

Further permission has now been introduced for REITs to invest in properties under development or engage in property development activities; and to purchase financial instruments (including listed securities, unlisted debt securities, government and other public securities, and local or overseas property funds), subject to at least 75% of the gross asset value (GAV) of a REIT being invested in real estate that generates recurrent rental income at all times.

Also, restrictions have been introduced to ensure transparency in a REIT’s activities. They include maximum thresholds on investments (such as a limit on property development investments of up to 10% of a REIT’s GAV), a minimum holding period of 2 years after completion of the property development, a restriction on investment in vacant land, and new disclosure and reporting requirements.

The SFC said the revised Code will facilitate the long-term growth of Hong Kong’s REIT market, and said Hong Kong’s regime is broadly in line with regulations in comparable international markets.

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

HK starts FTA negotiations with ASEAN

The first round of successful negotiations on the proposed free trade agreement (FTA) between Hong Kong and the Association of Southeast Asian Nations (ASEAN) http://www.asean.org/asean/about-asean was held on July 10-11.

Representatives from the Governments of the 10 ASEAN member states met representatives of the Hong Kong Government in Hong Kong at the first meeting of the Hong Kong-ASEAN Trade Negotiation Committee. This was the formal commencement of the FTA negotiations.

ASEAN member states are:
Brunei Darussalam,
Cambodia,
Indonesia,
Laos,
Malaysia,
Myanmar,
the Philippines,
Singapore,
Thailand,
Vietnam.

Hong Kong’s Secretary for Commerce and Economic Development said: “An FTA between Hong Kong and ASEAN will boost the economic growth of the two sides, and at the same time further enhance Hong Kong’s role as a regional trading hub, and as a gateway for trade and investment between ASEAN and the Mainland.”

ASEAN is the second largest trading partner of Hong Kong in terms of goods and the fourth largest in terms of services. ASEAN is also the 5th largest destination of foreign direct investment (FDI) from Hong Kong and the 6th largest source of FDI into Hong Kong.

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