Financial services link Duchy to HK

PUBLISHED : Wednesday, 23 June, 2010, 12:00am
UPDATED : Wednesday, 23 June, 2010, 12:00am

The bonds between Hong Kong and Luxembourg are steadily increasing thanks to both jurisdictions being centres for the financial services industry.

Luxembourgers may be thin on the ground here - and back home the population is less than 500,000 - but offices of the major players in the Grand Duchy's accounting and finance sectors are placing personnel here.

Although many of those executives are Belgian, German or French, it all makes sense as their nations border Luxembourg and send about 200,000 commuters into the Grand Duchy each day. About half that number are German.

One reason why so many who make their living in one of the world's wealthiest nations live outside it comes down to house prices. Many of these commuters work at the more than 155 banks in the country, which is the world's second-largest centre for investment funds after the United States. Much of the money comes from Hong Kong and the mainland and finance industry specialists say that more than half the retail funds sold in Hong Kong are incorporated in the Duchy.

One of those who knows the commute from the German border town of Trier is Miriam Keusen, a senior manager at KPMG Tax, who is now on secondment to Hong Kong.

'I wanted to come to Asia. It's the dream of my life to be here for a while and see the way both markets operate.

'Luxembourg is very beneficial for tax benefits and more Hong Kong clients are seeking this. In a way, it feels that my day-to-day work here is building a bond between Luxembourg and Asia,' says Keusen, who advises clients on such matters as the Duchy's tax laws, company incorporation and compliance when seeking investment opportunities.

Firms such as KPMG and Deloitte have found that more Chinese high-net-worth clients see Luxembourg as an excellent onshore investment vehicle. Deloitte set up a representative office here to handle the growing number of clients wanting to invest via funds or through entities formed in Luxembourg. Hong Kong now has its first Luxembourg law firm in the form of Arendt & Medernach, which set up a representative office last November to deal with this growing demand. Guy Harles, founding partner and head of international development and strategy, says the firm is also eyeing private banking as an area of expansion.

As the Duchy's largest full-service law firm, with nearly 400 professionals including 270 lawyers and offices in Luxembourg, Brussels, New York, London and Dubai, the company's decision to set up in Hong Kong came when the free-trade agreement, Closer Economic Partnership Arrangement, was signed between Hong Kong and Beijing.

'Asia is the place you have to be in the 21st century,' Harles told InvestHK, the government's inward investment arm.

'We chose Hong Kong because it is a leading international financial centre with a very positive outlook, as China continues to internationalise.'

Harles added that the signing of the agreement between Hong Kong and Luxembourg on the avoidance of double taxation in November 2007 was 'a welcome addition, further enhancing business between the two jurisdictions'.

As tax laws get tougher worldwide, finance specialists say Luxembourg is becoming more attractive to high-net-worth individuals because of compliance and tax laws structured to achieve benefits for investors.

'For those looking to invest in public limited companies, Luxembourg would be one of the favourite options, with very broad funds - multinational companies and a strong fund industry,' says one Luxembourg tax adviser.