Hong Kong’s Financial Secretary delivered a budget speech on 28 February 2018. The section dedicated to the financial services industry is available here.
Briefly, the following items are noteworthy for the asset management sector:
OFC: The government is aiming for the open-ended fund company (OFC) regime, including the tax exemption, to commence this year. The OFC is a new investment vehicle in the form of a mutual fund.
Further details are available in our previous publications: Comparison of two fund vehicles: the HK OFC and the Cayman exempted company; Proposed profits tax exemption for HK private open-ended funds; Consultation reveals details of HK’s corporate fund vehicle; Legislation passed for new fund vehicle.
PE limited partnership: The government is examining the feasibility of introducing of a limited partnership structure with tax arrangements for private equity funds. The initiative was recommended by the Financial Services Development Council in its report of December 2015: A paper on limited partnership for private equity funds.
China access: The government is considering introducing a wider range of investment products in the mutual access mechanism between Hong Kong and the Mainland. Following the implementation of “Stock Connect” and “Bond Connect”, the launch of “ETF Connect” is expected in the second half of 2018.
MPF: The government plans to introduce tax concessions for voluntary mandatory provident fund (MPF) contributions, and for those contributions to be transferred to the mandatory accounts of MPF schemes (and thereby be subject to withdrawal restrictions); and
Development fund: The government is allocating HK$500 million to the financial services industry to support various development initiatives including fintech.
The speech provides no major surprises in the government’s areas of focus for the financial services industry, although the formal announcement of a limited partnership regime review will be welcomed by the private funds industry. The introduction of tax relief for voluntary MPF contributions should provide a much-needed incentive and impetus for investors to save more realistic amounts for retirement through the MPF system.
For more see Conventus Law.