Hong Kong offers tax exemption to entice private equity
Monday, March 30, 2015
(International Tax Review by Meredith McBride) – In an effort to place itself at the centre of venture capital and private equity investment in Asia, the Hong Kong government introduced a Bill in its Legislative Council on March 25 to extend an exemption from the territory’s 16.5% profits tax to include offshore private equity funds, which is already extended to other types of offshore funds.
Complicated Capital
Tax advisers say the absence of private equity in the original bill could have been simple oversight, or the exclusion could have been delayed due to the technical nature of PE.
"It’s very complicated to get this legislation right," said John Levack, chairman of the technical committee of the Hong Kong Venture Capital and Private Equity Association.
"In 2006 when the current tax exemption law for offshore funds was enacted, the definition of securities excluded private companies as in those days, private equities were not as hot as has subsequently proven to be the case," said Florence Yip, head of PwC’s private equity tax practice in China & Hong Kong.
The exclusion created problems for managers, who had to be acutely aware of their activities in Hong Kong to avoid creating tax liabilities.
"Some managers…
