is growing to the terms of proposed new legislation
to exempt offshore funds from taxation in Hong
While the funds management industry welcomes
the government's plans to implement an exemption,
they are concerned that details of the legislation
will drive business away.
Last week, the Association of Chartered Certified
Accountants said proposed anti-avoidance provisions
were "too complicated to follow" and
imposed "too much administrative burden"
on the industry.
PricewaterhouseCoopers, which made a similar
assertion two days later, went further by calling
on the government to grant "a blanket exemption
from Hong Kong profits tax to genuine and bona
fide offshore funds that are managed or advised
by a Securities and Futures Commission approved
Robert Grome, head of PwC's regional investment
management industry group, said the proposed law,
outlined in a consultation paper six weeks ago,
did not guarantee certainty.
Existing laws exempt all funds registered with
the SFC from paying 17.5 per cent profits tax
but this does not specifically extend to thousands
of overseas registered funds that invest in Hong
This contrasts with Singapore, where such funds
are exempted by statute.
The consultation document also details a series
of conditions for exemption that the industry
deems too onerous. PwC and the ACCA agree that
funds group will find it very difficult to determine
whether more than 80 per cent of an offshore fund
is owned by non-Hong Kong residents or whether
the fund and its investor conduct any other business
in the territory.
Earlier, the Hong Kong chapter of the Alternative
Investment Management Association said the government
should try not to rush through the legislation
in the current session to conclude an issue that
had troubled the local industry for several years.
"On close examination of the government's
proposals, AIMA members are concerned that this
legislation will create additional administration
costs and other unintended problems, even though
the intent of the government is admirable,"
said George Long, chairman of AIMA in Hong Kong.