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Hong Kong promises better tax deals, fund structures for PE

Thursday, February 28, 2019


(AVCJ by Tim Burroughs) - Hong Kong will consider altering its tax regime to encourage private equity firms to operate in the territory as well as offering more choice on fund structure through the introduction of a new limited partnership regime.

Making his annual budget speech, Financial Secretary Paul Chan (pictured) acknowledged the role that PE plays in economic development. He observed that the asset class not only attracts the “capital, talent and expertise” required for investment activity but also drives demand for management, accounting and legal services and creates business opportunities for the conference, hotel and tourism industries.

Chan went on to say that the government will “study the case of introducing a more competitive tax arrangement to attract private equity funds to set up and operate in Hong Kong.” He did not go into more detail as to what these arrangements might be.

Steps have already been taken to make it easier for private equity firms to carry out meaningful activities in Hong Kong without triggering permanent establishment from a taxation perspective. Amendments will come into effect on April 1 that should make the profits tax exemption more usable. Notably, the government has removed a tainting provision that threatened to make an entire fund liable for local tax if a single investment had exposure to Hong Kong real estate.


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