One of the most significant proposals being considered by the Hong Kong government as part of its effort to increase the city's competitiveness as a financial centre both globally and regionally is a plan to abolish estate duty.
With the majority of interested parties consulted supporting the abolition, if the bill is passed, the government hopes it will draw a significant portion of investments back to Hong Kong.
'This abolishment would definitely be a good move for Hong Kong as it would encourage people who have put their money in offshore accounts to avoid paying estate duty to remit some of that money back to Hong Kong, and some of that could be invested in local Hong Kong funds,' said Dennis Chow, managing director of the asset management division of GT Capital. He said the abolition of estate duty was expected to be implemented over the next two years.
Under existing law, the tax-free threshold for estate duty is $7.5million, while the maximum duty rate can be as high as 15 per cent on estates exceeding $10.5million.
With unprecedented opportunities emerging from the development of financial markets in Asia and given the intense competition, a number of countries in the region have abolished estate duty over the past two decades. They include Malaysia, New Zealand and Australia.
The change in Hong Kong would hopefully encourage people, including overseas investors, to hold assets in the city through a local corporate vehicle or trust, according to the Inland Revenue Department.