Exclusive | Tax laws poised to change in effort to lure more private equity fund houses to Hong Kong
Separate statements from Financial Secretary Paul Chan and Norman Chan, Hong Kong Monetary Authority chief executive, made in the past week
The Hong Kong government is poised to make changes to its restrictive tax exemption laws on private equity funds, in an effort to compete with Singapore and other markets as a start-ups fundraising centre.
Financial Secretary Paul Chan vowed, in a blog on Sunday, to change the laws to help attract more private equity funds to base themselves here, while Hong Kong Monetary Authority chief executive Norman Chan Tak-lam also last week indicated the government was set to review the tax regulations, with the same intention.
The sticking point is a 16.5 per cent profit tax, which is waived only if certain conditions are satisfied, such as if the private equity funds’ central management and control is actually outside Hong Kong.
If private equity funds invest in any Hong Kong-based starts ups, they cannot take advantage of the benefit.
To make things worse, if a private equity fund is investing in a portfolio of start-ups in different markets, including even one in Hong Kong, then all profit made by the entire portfolio of the fund would need to pay full tax.
