Proposed changes to exemptions for overseas investors have increased uncertainty
Finance houses in Hong Kong are urging the government to enhance its commitment to exempting offshore funds from profit taxes, lest ambiguity deter foreign fund managers from channelling portfolio investment into the SAR.
An official from PricewaterhouseCoopers (PwC) said the government's proposal last month to exempt offshore funds from profit tax did not go far enough, as the exemption applied only if several conditions were met.
'The proposed law does not meet the fund management industry's need for a high degree of certainty on an offshore fund's potential taxation liabilities,' said Robert Grome, the leader of PwC Asia-Pacific Investment Management Industry Group.
The conditions, some of which address the nationality of a fund's investors, would serve to exacerbate rather resolve uncertainties.
'The government should consider granting blanket exemptions from profit tax to all bona fide offshore funds.'
The existing law specifically exempts all of the about 1,800 funds registered with the Securities and Futures Commission from paying the 17.5 per cent tax on profits. However, it does not formally apply to the thousands of funds registered overseas but investing in Hong Kong securities.