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PE industry cautiously optimistic on Hong Kong tax reforms

Friday, January 18, 2019

(AVCJ by Tim Burroughs) - Industry participants have praised steps taken by the Hong Kong government to make it easier for private equity firms to operate locally, while cautioning that challenges remain regarding the regulation of managers in the territory.

“In the past, the government didn’t want you to invest. [Now] we want you to invest here in Hong Kong, we want you to have fewer restrictions on how you invest in private companie and benefit from tax concessions,” said Chris Sun, a deputy secretary with the Financial Services and the Treasury Bureau (FSTB), which is responsible for executing governmentpolicy on financial services issues, told the Hong Kong Private Equity & Venture Capital Association’s (HKVCA) Asia Forum.

The passing of legislation to amend the tax exemption for private equity is a formality, Sun added, and it will come into force on April 1. The move follows a critical report last year by the EU under the BEPS initiative, which is intended to stop investors exploiting gaps in the tax system to artificially shift profits to low or no-tax locations. The EU was uncomfortable with the tax exemption applying to offshore but not onshore funds, and Hong Kong promised action to implement a unified regime by the end of 2018.


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